Possible trouble with the purchase of GNOG
DraftKings is just finding itself in all sorts of legal messes lately. A law firm has announced an investigation into the sports betting company’s acquisition of Golden Nugget Online Gaming (GNOG) for potential violations of securities law and a British bookmaker has sued DraftKings for patent infringement.
Let’s start with the GNOG merger. In August, DraftKings announced that it had agreed to acquire GNOG for $1.56 billion, with GNOG shareholders receiving .365 shares of DraftKings for each share of GNOG. It certainly sounded like an interesting – and likely strong – pairing, with DraftKings’ sports betting dominance combining with GNOG’s online casino forte.
But now, New York-based Monteverde & Associates, a mergers and acquisitions-focused law firm, has launched an investigation into the combination. Juan Monteverde believes that Golden Nugget Online Gaming and its board of directors may have violated securities law and/or failed to conduct a “fair process.”
Monteverde is also going to investigate whether the valuation of the acquisition was properly determined. The implication here is likely that GNOG should have been worth more and GNOG failed its shareholders by not getting more from DraftKings. In this case, DraftKings isn’t necessarily the target of the investigation, but it is a close neighbor.
Colossus Bets claims patent infringement
And then there is Colossus Bets. Last week, the company filed suit in US District Court in Delaware, accusing DraftKings of seven counts of patent infringement.
Specifically, Colossus Bets claims that DraftKings “willfully infringed” on its cash-out feature patent. Not to be confused with withdrawing money from one’s account, a cash-out allows bettors to end their wager before the outcome of the associated event is determined for a partial payout or loss.
A bettor might choose to use a cash-out if they are winning a bet early – perhaps the underdog Bears are beating the Packers in the first quarter this coming Sunday night – but they are not confident that the win will hold until the end. They could end the bet early and take some profit, but less profit than they would make if they see the game all the way through and win.
Alternatively, a bettor might be losing a bet. If they are allowed the cash-out, they could effectively cry uncle and give up and still lose money, but not as much as they would if they hung in until the end.
Colossus Bets’ patents go back to 2016. In the lawsuit, the company says that it notified DraftKings of infringements on more than one occasion between August 2018 and July 2021. On July 20 of this year, Colossus sent a letter via certified mail, noting the specific patents it believes DraftKings infringed upon, along with details of the features in question. DraftKings did not respond to any correspondence.
Colossus seeks up to treble damages, compensation for past and future violations, and interest.
