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Sports Bettors Lose Appeal In “Electronic Sign-Stealing” Case

March 25, 2022

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<p style="text-align: justify;">In <em><a href="">Olson v. Major League Baseball</a>,</em> the 2nd Circuit Court of Appeals recently refused to hold Major League Baseball (MLB), the Houston Astros, and the Boston Red Sox liable for alleged fraud against sports bettors. The appeal stems from a 2020 class action suit involving Plaintiffs’ use of the popular sports betting platform DraftKings, whose participants accumulate “points” (and can win cash) based on the real-life performance of their “drafted” players. (Of note, the fantasy sport competitions offered by DraftKings are considered “games of skill,” which are exempt from federal prohibitions on illegal gambling, pursuant to the Unlawful Internet Gambling Enforcement Act.</p>
<p style="text-align: justify;">In their Complaint, Plaintiffs claimed violations of state consumer protection laws, unjust enrichment, and negligence through Defendants’ use of electronic “sign-stealing” in the 2017 -2019 seasons, and its impact on sports betting. Pitchers and catchers in baseball use signs to communicate the type of pitch to throw, and knowing what pitch is coming increases a batter’s chance of hitting the ball. While the MLB does not explicitly prohibit “sign-stealing” amongst teams, it does prohibit “electronic sign-stealing” or the use of technology to identify and decode signs.</p>
<p style="text-align: justify;">After news broke of the sign-stealing scandal and Defendants’ alleged attempts to conceal the names of participants, the class action was filed. Specifically, plaintiffs claimed the Defendants’ efforts of concealment “induced DraftKings participants to [place money bets]…which each player would not have done had he known the honesty of player performance statistics on which his wagers were based.”</p>
<p style="text-align: justify;">The 2<sup>nd</sup> Circuit was not impressed with Plaintiffs’ arguments. In affirming the dismissal of the suit by the Southern District of New York, the 2<sup>nd</sup> Circuit observed that “this action is nothing more than claims brought by disgruntled fantasy sports participants, unhappy with the effect that cheating in MLB games may have had on their level of success in fantasy sports contests.” It found that the alleged misrepresentations or omissions by organizers and participants in professional baseball about the competition itself, including statements about performance or rules violations, do not give rise to plausible claims sounding in fraud or related legal theories brought by consumers of a fantasy sports competition who utilize player statistics. The court recognized that no fantasy baseball consumer could plausibly allege that, in paying to participate, they reasonably believed that Major League Baseball was free from cheating or rules violations.</p>
<p style="text-align: justify;">The <em>Olson</em> case is a good example of a court using common sense, and not being swayed or distracted by creative or result-oriented legal arguments, to dismiss a questionable lawsuit driven by greed.</p>
<p style="text-align: justify;">Thank you to Alexandra Deplas for her contribution to this post. Please contact <a href="">Andrew Gibbs</a> with any questions.</p>

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