The change follows a July legal opinion issued by California Attorney General (AG) Rob Bonta, which deemed DFS illegal in the state. Although the opinion does not change the law, it signals increased scrutiny and potential enforcement risks for DFS operators.

The switch by Underdog is not surprising. Rival PrizePicks made a similar transition in anticipation of Bonta’s decision. The two companies, along with other DFS operators, have made changes to the formats in various states under regulatory scrutiny regarding player-vs-house DFS.

How’s “Champions” Different Than Pick ‘Em?

The most significant difference between the two formats is the user’s opponent.

In Pick ‘Em, players compete against the house by predicting over/under outcomes on individual player stats. For example, whether Patrick Mahomes will throw over or under 300 yards.

The house determines Pick ‘Em contest odds. Winnings are based on fixed multipliers, which depend on the number of correct picks. For example, two correct picks award a 3x multiplier, while eight correct picks result in the player winning 120 times their stake.

There are also additional options, such as Flex picks (which offer lower payouts but allow for missing a pick) and “Rivals,” where users select which of two athletes will outperform the other.

In contrast, in the “Champions” format, users compete against each other in a pool. The entire funding comes from entry fees. Participants create a roster of 2-8 athletes and predict whether each athlete will perform higher or lower than a benchmark statistic.

Correct stat predictions earn Champions Points, and the entry with the most points wins. The amount each participant wins depends on their performance compared to their peers.

As the Champions format removes the house as a participant, it could offer a stronger legal defense in states like California, where playing against the house is classified as illegal gambling.

It’s the same legal rationale behind the cardrooms in the state employing third-party dealers, known as Third-Party Proposition Player Services, something Bonta wants to change.

DFS’ Uncertain Status in California

The Attorney General’s opinion does not change the law in California. It serves as an advisory interpretation of the law, intended to guide lawmakers and enforcement agencies.

For DFS to be classified as illegal, lawmakers must pass a new law or the courts must intervene. Still, some observers note that California courts traditionally side with the Attorney General’s legal opinions.

Until a regulatory or legislative change occurs, DFS platforms will likely continue operating in California.

Bonta is not the first AG to grapple with the legality of DFS. In 2016, attorneys general in Hawaii, Alabama, and Texas declared DFS illegal under their respective state laws. However, the response varied.

Hawaii has remained off-limits for anything gambling-related, including daily fantasy. In Alabama, PrizePicks continues to offer Pick ‘Em, while Underdog has switched to the Champions format. Meanwhile, multiple platforms, including Underdog and PrizePicks, offer Pick ‘Em in Texas.

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At the same time, rival PrizePicks has already pivoted to a peer-to-peer model in anticipation of this shift.

California Attorney General (AG) Rob Bonta is expected to issue a long-awaited legal opinion on DFS legality as soon as today. The opinion, although technically advisory, is likely to have a significant ripple effect on operators and potentially reshape the state’s multibillion-dollar DFS market.

Underdog Challenged Bonta’s Upcoming Decision

Underdog Fantasy, one of the biggest DFS operators in the country, filed a lawsuit on June 30. It asked the courts to block Bonta from issuing the opinion.

The operator argued that DFS contests are games of skill, not chance (which constitutes gambling).

The company also questioned Bonta’s authority to issue such an opinion. It pointed out that the opinion would be a response to a request made by Sen. Scott Wilk, who is no longer in office.

Furthermore, Underdog claimed that a potential DFS ban would only serve to benefit native tribes. The tribes, which have exclusivity over legal gambling in California, have long argued that unregulated sectors, such as fantasy sports, are illegal gambling.

Court Denies Underdog’s Lawsuit

On July 2, Sacramento County Superior Court Judge Jennifer Rockwell denied Underdog’s motion for a temporary restraining order.

One of the reasons Judge Rockwell refused to block Bonta’s upcoming opinion was that Underdog did not demonstrate that the opinion would cause them immediate, irreparable harm.

Additionally, the judge noted that since Sen. Wilk made the request in October 2023. That means Underdog had over a year and a half to challenge it. The delay weakened the operator’s argument for emergency relief.

Rockwell also emphasized that the AG’s opinion does not change the laws:

“Further, the Attorney General’s issuance of an opinion of pursuant to Government Code section 12519 does not effect any change in the law,” citing case law stating that “the opinions of the California Attorney General are advisory only and do not carry the weight of law.”

As a result, Rockwell concluded:

“Accordingly, Petitioners have not established that they will suffer any harm as a result of the issuance of Opinion No. 23-1001. The Ex Parte Application is denied. No hearing will be held.”

It remains unclear whether Underdog will appeal the decision.

PrizePicks Changes Offerings in California

Underdog’s rival, PrizePicks, took a different approach in anticipation of Bonta’s anticipated opinion.

The company changed its product format in California, discontinuing the popular against-the-house Pick ‘Em games on June 30. It now offers only its peer-to-peer “Arena” contests in the state.

In both formats, users select performance projections for two to six players. For example, if a quarterback will throw over a certain number of yards. The difference is that in the now-discontinued format, users play against the house, which determines the odds and payouts.

Meanwhile, in the “Arena” peer-to-peer, the odds and payouts are determined by each user’s performance relative to the other players in the pool, similar to traditional fantasy contest leaderboards. The prize pool is distributed among the top finishers.

PrizePicks’ pivot is not unprecedented. The company introduced peer-to-peer contests as a response to regulatory scrutiny in several states over the past few years.

As a similar scenario is unfolding in California, PrizePicks is likely aiming to position itself on firmer legal ground. California is the largest DFS market in the US, making the stakes particularly high.

In its lawsuit, Underdog Fantasy stated that the state accounts for approximately 10% of its revenue. That suggests that PrizePicks may face a similar level of exposure.

If California were to ban DFS, it would result in severe financial consequences for PrizePicks, Underdog, and other operators, such as DraftKings and FanDuel.

AG’s Opinion Could Come Today

Bonta’s office has not confirmed when he will release his opinion. Still, Sacramento news outlet KCRA 3, which first broke the news, claims multiple sources have indicated the AG would deliver it by today.

When Underdog filed its lawsuit, some speculated that it might delay Bonta’s decision. However, with Judge Rockwell denying the lawsuit, it now appears to remain on schedule.

Still, if Underdog files an appeal, it could mean additional delays.

It’s important to note that, as the judge emphasized, Bonta’s legal opinion does not change the law.

Still, McGeorge School of Law adjunct professor Chris Micheli notes that California courts traditionally grant “a fair amount of deference” to the Attorney General’s legal opinions. That means they can strongly influence future enforcement and policy decisions.

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Huffman spent two years as the Director of Social Media for PrizePicks before switching to a new role with DraftKings as Director of Social and Community for its sportsbook.

PrizePicks claims that before departing, Huffman uploaded a “highly sensitive brand planning document” and other documents relating to the company’s plans to ChatGPT. 

DraftKings is believed to have initially offered Huffman a salary of $200,000 a year, but this was then increased to $210,000. PrizePicks alleges that the increase was due to Huffman sharing company secrets with his new employers. 

“We are taking swift steps to ensure that our trade secrets and innovations are safeguarded,” said Elisa Richardson, spokesperson for PrizePicks, as quoted in SBC Americas.

Huffman violated noncompete and destroyed evidence

Additionally, Huffman had signed a noncompete agreement with PrizePicks, which the company claims he violated by signing a contract with DraftKings on May 2 and then handing in his notice at PrizePicks on May 5. 

The lawsuit, filed in the Western Washington District Court, states: “Huffman’s misappropriation and disclosure of PrizePicks’ Trade Secrets to DraftKings, a competitor, were intentional, deliberate, and calculated and therefore willful and malicious, especially considering Huffman’s destruction of evidence.”

Huffman handed in his company laptop to PrizePicks after handing in his notice, and the company notes that there was a “surgical” deletion of files, emails, and chats. The lawsuit alleges this is evidence of Huffman’s guilt and attempts to cover his tracks. 

PrizePicks is suing Huffman for breach of contract, violation of the Defend Trade Secrets Act, and breach of fiduciary duty. In addition, the company is also seeking a temporary injunction to prevent his employment at DraftKings. 

The Accuser Becomes the Accused

In a similar case, DraftKings sued former VIP executive Mike Hermalyn for violating his noncompete and sharing trade secrets with Fanatics. Hermalyn took up a role with the rival betting company after leaving DraftKings in February last year. 

A Massachusetts federal judge issued a preliminary injunction in April, limiting Hermalyn’s ability to work on DraftKings‑related business but affirming his overall employment at Fanatics.

Later that year, the two companies settled, and Hermalyn continues to lead Fanatics’ VIP operations. 

DraftKings was also disciplined for sharing sensitive information on social media last year. The US Securities and Exchange Commission (SEC) fined the company $200,000 for disclosing nonpublic information to investors via CEO Jason Robins’ social media accounts.

ChatGPT Lands Multiple Executives in Hot Water

In Robins’ case, it was social media rather than ChatGPT that landed him in hot water, but the growing use of AI poses a threat to corporate security. A 2023 Cyberhaven study revealed that 4.7% of employees have uploaded confidential data to ChatGPT. 

Some high-profile cases include Samsung engineers uploading internal meeting transcripts and pasting other sensitive materials onto ChatGPT in an attempt to analyse the data. 

Last month, a lawyer in Utah was also caught generating a fake case through ChatGPT. Richard Bednar filed a brief referencing a made-up “Royer v. Nelson” case.

After admitting to the rogue use of the AI tool, Bednar was ordered to pay the opposing attorney’s legal fees and also refund his client’s fees. 

Similarly, attorneys defending Alabama’s prison system included five fake case citations generated by ChatGPT in federal filings last month. A federal judge is considering sanctions, including fines, and ordered the firm to explain its oversight process.

In the gambling industry, Google announced a crackdown on parasite SEO affiliate sites that use ChatGPT to generate content last year. 

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“The Padres are one of the most dynamic franchises in Major League Baseball, and we’re proud to be part of their journey,” Mike Quigley, Chief Marketing Officer at PrizePicks, said Wednesday in a news release. “PrizePicks players and Padres fans share a deep passion for the game, and we look forward to creating new ways to engage and connect with fans both in San Diego and across the country.”

The next day, PrizePicks announced a similar partnership with the San Francisco Giants. It also renewed its agreement with the Atlanta Braves earlier this month.

As part of the deal with San Diego, PrizePicks’ branding will be prominently featured throughout Petco Park, including LED signage in the outfield and banner displays throughout the concourses. Additionally, PrizePicks will be advertised digitally on Padres.com and in pregame commercial readouts on Padres.TV during the regular season.

New PrizePicks Promotions Promised with Padres

PrizePicks is launching a promotion in which fans will be eligible to participate in a text-to-enter contest for a chance at a $10,000 free DFS lineup when the Padres score 10 runs or more in a home game.

This mirrors a promotion being run for Braves home games.

Similarly, Giants fans can join a text-to-enter promotion with the chance to win a free $12,000 lineup and tickets to a future game at Oracle Park when Giants pitchers combine for 12 strikeouts at home.  

“We are excited to partner with PrizePicks to bring Padres fans even closer to the game of baseball,” Padres Executive Vice President of Business Affairs Sergio del Prado said in a news release. “Together, we are creating unique opportunities for fans to follow and connect with the team and are giving them even more reason to celebrate when the Padres score.”

DFS Under the Microscope in California

PrizePicks operates in 46 jurisdictions, making it the largest DFS operator in the United States. The site offers a variety of sports for its statistical contests, including the NFL, NBA, NHL, MLB and WNBA. Within those markets, users can create parlay-style tickets for specific player stats.

While sports betting remains prohibited in California, with the state having voted against it in 2022, there are no explicit laws against DFS. This allows DFS sites such as PrizePicks to operate in a “legal gray area.”

With an estimated $200 million in annual entry fees — none of which, notably, goes to the state — the Golden State is the country’s biggest DFS market.

Attorney General Rob Bonta is now reviewing the legality of such contests. His focus is on whether DFS contests are more skill-based or a game of chance, which would make them illegal under state law.

Pick’em Contests Draw Scrutiny

DFS operators’ pick-’em contests have drawn regulatory scrutiny in several states. Underdog Fantasy, for instance, recently announced plans to leave New York and pay the regulator $17.5 million.

The company departed after the New York State Gaming Commission deemed specific contests prohibited under its original license.

Underdog General Counsel Nicholas Green said: “It’s a unique, temporary license issue specific only to New York and not related to any specific format we offer.”

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The new three-year agreement builds on a relationship that was initially signed in 2020.

“We are thrilled to continue our partnership with the Atlanta Braves and bring even more unforgettable experiences to fans across Braves Country,” Mike Quigley, Chief Marketing Officer at PrizePicks, said in a news release. “As a company rooted in community and growth, we’re proud to extend this collaboration for a fifth consecutive season and deepen our connection with fans nationwide.”

As part of the deal, new branding for the Atlanta-based PrizePicks will be featured throughout Truist Park with a combination of static and LED signage. The company will also retain access to exclusive VIP experiences and the naming rights to the “PrizePick Pick of the Game” segment, which airs on the Braves Radio Network pregame show during the regular season.

PrizePicks Expanded Partnership Aims to Enhance Fan Experience

New for this season, PrizePicks is introducing a “PrizePicks 10 runs for 10k” promotion. Each time the Braves score 10 runs at Truist Park, the team will launch a text-to-enter promotion giving fans the chance to win a $10,000 free PrizePicks lineup and tickets to a future Braves game.

“As a growing leader in their industry and trusted partner of the Braves since 2020, we are excited to build on this partnership with PrizePicks into the next few seasons and bring more engaging fan experiences for our shared communities to enjoy,” Jim Allen, Braves senior vice president of corporate and premium partnerships, said in a news release.

PrizePicks is now available in 45 states plus Washington, D.C., along with all of Canada besides Ontario. In its home base of Georgia, where sports betting is prohibited, PrizePicks offers an extensive list of games, including the NFL, NBA, NHL, and MLB, plus the WNBA, college sports, and the PGA Tour.

Some of its available contests include pick’em competitions, in which users can make over/under predictions on specific stats for two to six players. 

Pick’ems Under the Regulatory Microscope

In the last year, pick’em contests by daily fantasy operators have been under significant regulatory scrutiny. Recently, Underdog Fantasy announced it would be leaving the state of New York and paying the regulator $17.5 million. 

The settlement concerned Underdog operating unpermitted interactive fantasy sports contests after its acquisition of Synkt and its temporary permit in 2022. The New York State Gaming Commission deemed certain contests offered not to be permitted under the original license. 

Underdog’s General Counsel Nicholas Green commented: “It’s a unique, temporary license issue specific only to New York and not related to any specific format we offer.”

“Any fantasy game created after 2015, no matter the format, is not permitted under the commission’s interpretation of what games a temporary permitholder, like Underdog, can and cannot offer,” he continued.

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