What changed in this filing

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Item 1. Legal Proceedings

2024-05-03 compared with 2023-11-03 · 88 added, 66 removed, 268 unchanged (36% of the section changed)

38 unchanged sentences

In the Complaint, IG alleges that our DFS product offering infringes two patents:

8,956,231 (the

“231 Patent”), which is entitled “Multi-process communication regarding gaming information”, and U.S.

8,956,231 (the “231 Patent”), which is entitled “Multi-process communication regarding gaming information”, and U.S.

8,974,302 (the “302 Patent”), which is entitled “Multi-process communication regarding gaming information.” That same Complaint alleges that our Sportsbook product offering infringes two additional patents:

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Section 101, asserting the IG Patents are directed to non-patentable subject matter.

The Court has not yet ruled on that motion, as the judge previously stayed the District Court litigation pending resolution of the inter partes reviews and dismissed the motion to dismiss (without ruling on the merits), but granted leave to refile such motion with updated briefing if the stay is lifted.

The Court did not rule on that motion, as the judge previously stayed the District Court litigation pending resolution of the inter partes reviews and dismissed the motion to dismiss (without ruling on the merits), but granted leave to refile such motion with updated briefing if the stay is lifted.

On June 17, 2020, we filed petitions for inter partes review with the Patent Trial and Appeal Board (the “PTAB”) challenging the validity of each of the IG Patents.

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On June 9, 2023, the Federal Circuit affirmed the PTAB’s decisions for the IPRs related to both the ’231 Patent and ’967 Patent.

The ’302 Patent is currently subject to an ex parte reexamination proceeding at the U.S.

The ’302 Patent was subject to an ex parte reexamination proceeding at the U.S.

Patent and Trademark Office (U.S.

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90/015,151) (the “’302 Reexam”).

On June 12, 2023, a non-final office action was issued in the ’302 Reexam, rejecting or objecting to all claims in the ’302 Patent.

The District Court litigation remains stayed pending resolution of both:

(1) all appeals from the inter partes reviews, and (2) the '302 Reexam and any subsequent appeals therefrom.

We intend to vigorously defend this case.

In the event that a court ultimately determines that we are infringing the asserted patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to modify certain features that we currently offer.

We cannot predict with any degree of certainty the outcome of this matter or determine the extent of any potential liabilities.

We also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, we do not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on our financial condition, although the outcome could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

On March 15, 2024 the PTO issued a notice of intent to issue a reexamination certificate for certain claims in the ’302 Reexam.

On April 12, 2024, the USPTO issued a reexamination certificate for the ‘302 Patent.

On April 9, 2024, IG dismissed the district court litigation without prejudice.

On July 7, 2021, Winview Inc., a Delaware corporation (“Winview”) filed suit against the Company in the U.S.

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On July 28, 2021, Winview filed an amended complaint, in which it alleges that the Company infringes two additional patents:

9,993,730 (“the ’730 Patent”), entitled ”Methodology for Equalizing Systemic Latencies in Television

Reception in Connection with Games of Skill Played in Connection with Live Television Programming”, and U.S.

9,993,730 (“the ’730 Patent”), entitled ”Methodology for Equalizing Systemic Latencies in Television Reception in Connection with Games of Skill Played in Connection with Live Television Programming”, and U.S.

10,806,988 (“the ’988 Patent”), entitled “Method Of and System For Conducting Multiple Contests of Skill with a Single Performance”.

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and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company.

The SAC, among other allegations, repeats the allegations of the first amended complaint that the defendants infringe the ’243 Patent, the ’543 Patent, the ’730 Patent, and the ’988 Patent.

SAC, among other allegations, repeats the allegations of the first amended complaint that the defendants infringe the ’243 Patent, the ’543 Patent, the ’730 Patent, and the ’988 Patent.

On December 15, 2021, the Company filed its motion to dismiss the SAC, again arguing that Winview failed to state a claim for direct infringement of the ’543 Patent and the ’730 Patent, and for willful, induced, and contributory infringement for all four asserted patents.

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On February 15, 2023, the District Court administratively terminated the lawsuit pending the PTAB’s final written decision.

On January 29, 2024, the PTAB issued final written decisions in the IPRs, finding unpatentable all challenged claims of the ’243, ’543, and ’730 Patents.

On February 16, 2024, the parties jointly requested that the case remain administratively terminated until at least the expiration of the time period for WinView to file a notice of appeal (April 1, 2024).

On February 20, 2024, the court granted the request.

On March 29, 2024, WinView filed a notice of appeal in the United States Court of Appeals for the Federal Circuit, challenging the PTAB’s final written decisions in the IPRs.

On April 11, 2024, the parties jointly requested that the district court litigation remain administratively terminated until at least the Federal Circuit issues its mandate regarding WinView’s appeals.

On April 15, 2024, the district court ordered the case to remain administratively terminated.

We intend to vigorously defend this case.

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Securities Matters Arising From the Hindenburg Report and Related Matters

On July 2, 2021, the first of two substantially similar federal securities law putative class actions was filed in the U.S.

District Court for the Southern District of New York against the Company and certain of its officers.

The actions alleged violations of Sections 10(b) and 20(a) of the Exchange Act on a behalf of a putative class of persons who purchased or otherwise acquired the Company's stock between December 23, 2019 and June 15, 2021.

The allegations related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”).

On November 12, 2021, the court consolidated the two actions under the caption In re DraftKings Securities Litigation and appointed a lead plaintiff.

The lead plaintiff filed a consolidated amended complaint on January 11, 2022.

On February 22, 2022, defendants filed a motion seeking dismissal of this action, and in response, the lead plaintiff filed a second amended complaint on April 5, 2022.

On April 26, 2022, defendants again filed a motion seeking dismissal of this action.

On January 10, 2023, the court granted the motion to dismiss and final judgment was entered dismissing the action with prejudice.

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations raised in the Hindenburg Report, as well as the Company’s adherence to and disclosures regarding its compliance policies and procedures, and related matters.

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research, as well as the Company’s adherence to and disclosures regarding its compliance policies and procedures, and related matters.

The Company intends to comply with the related requests and is cooperating with the SEC’s ongoing inquiry.

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We also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in the SEC matter

could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Any adverse outcome in the SEC matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, we do not believe, based on currently available information, that the outcome of the SEC matter will have a material adverse effect on our financial condition, although the outcome could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

Shareholder Derivative Litigation Related to Allegations in the Hindenburg Report

On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company.

The actions purported to assert claims on behalf of the Company against certain current and former officers and/or members of the Board of Directors of the Company and DEAC.

The two actions filed in the U.S.

District Court for the District of Nevada were subsequently consolidated, and two of the actions filed in Nevada state District Court in Clark County likewise were consolidated.

A substantially identical fifth action was filed in Nevada state District Court in Clark County and was subsequently dismissed voluntarily by the plaintiff.

The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which was also dismissed voluntarily by the plaintiff.

The Nevada actions purported to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report.

The federal court action in Nevada also contended that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act.

The Nevada actions sought unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees.

The Nevada actions were voluntarily dismissed without prejudice by the plaintiffs in state court on February 27, 2023 and in federal court on March 3, 2023.

Matters Related to the GNOG Transaction

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alleging that certain former officers and directors of GNOG Inc.

and its former controlling stockholder (Tilman Fertitta and/or Fertitta Entertainment, Inc.) breached their fiduciary duties to minority stockholders of GNOG Inc.

and its former controlling stockholder (Tilman Fertitta and/or Fertitta Entertainment, Inc.) breached their fiduciary duties to

minority stockholders of GNOG Inc.

in connection with the GNOG Transaction, and the other defendants aided and abetted the alleged breaches of fiduciary duty.

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On October 1, 2023, the court entered an order (1) denying the motion for reconsideration and (2) granting the motion for certification of final judgment as to the defendants whose claims against them previously were dismissed.

On January 18, 2024, the court entered a stipulated order extending the stay until resolution of the parallel proceedings in Delaware Chancery Court.

On September 9, 2022, two similar putative class actions were filed in the Delaware Court of Chancery against former directors of GNOG Inc.

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On June 8, 2023, the court denied defendants’ motion to dismiss.

The Company intends to vigorously defend against these claims.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

At a mediation held on January 24, 2024, the parties reached an agreement in principle to settle the Delaware action, which was reflected in a written settlement agreement, dated March 1, 2024, which remains, subject to, among other things, court approval.

The Company intends to vigorously defend against the Nevada action.

The Company cannot predict with any degree of certainty the outcome the Nevada action or determine the extent of any potential liabilities.

The Company also cannot provide an estimate of the possible loss or range of loss of the Nevada action.

Any adverse outcome in the Nevada action could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of the Nevada action will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

AG 18, LLC d/b/a/ Arrow Gaming

25 unchanged sentences

On December 2, 2022, the Company filed a reply in support of the motion to stay.

Between August 22, 2022 and August 30, 2022, the Company filed petitions for inter partes review with the PTAB challenging the validity of each of the Arrow Gaming Patents.

On March 14, 2023, the PTAB granted institution of all inter partes review petitions, and it is expected to issue final written decisions by March 14, 2024.

On June 7, 2023, Arrow Gaming filed its responses to the petitions.

On September 6, 2023, DraftKings filed its replies in support of the petitions.

Between August 22, 2022 and August 30, 2022, the Company filed petitions for inter partes review (“IPRs”) with the PTAB challenging the validity of each of the Arrow Gaming Patents.

On March 14, 2023, the PTAB granted institution of all IPRs.

On March 12 and 13, 2024, the PTAB issued final written decisions in all pending IPRs finding all claims that were asserted in the litigation unpatentable.

Only two claims were not found unpatentable:

claim 18 of the ’205 Patent and claim 11 of the ’657 Patent.

Neither of these claims were asserted in the litigation brought by Arrow Gaming.

On April 3, 2023, the District Court administratively terminated the lawsuit pending the PTAB's final written decisions.

The parties have agreed to maintain the stay pending any appeals of the PTAB’s final written decisions in the IPRs.

We intend to vigorously defend this case.

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Beteiro’s reply brief was filed on July 1, 2023.

Oral argument is scheduled for May 7, 2024.

On October 28, 2022, the Company filed petitions for inter partes review with the PTAB challenging the validity of each of the Beteiro Patents.

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On March 25, 2022, a scheduling order was entered in which, among other things, trial was scheduled for January 13, 2025.

July 18, 2022, Magistrate Judge Burke issued a report and recommendation (the “Report and Recommendation”) that the motion to dismiss be granted-in-part and denied-in-part.

On July 18, 2022, Magistrate Judge Burke issued a report and recommendation (the “Report and Recommendation”) that the motion to dismiss be granted-in-part and denied-in-part.

The Company and Colossus each filed their objections to the Report and Recommendation on August 1, 2022.

10 unchanged sentences

Between November 29, 2022, and February 7, 2023, the Company filed petitions for inter partes review with the PTAB challenging the validity of the Colossus Patents.

With respect to the seven patents remaining pending in the case, the PTAB granted institution of IPRs for each of the ’341 patent, ’969 patent, and the ’822 patent.

The PTAB is expected to issue final written decisions for these three IPRs by June 22, 2024.

The PTAB granted institution of IPRs for each of the ’341 patent, ’969 patent, and the ’822 patent.

The PTAB denied institution of IPR for each of the ’516 patent, ’716 patent, ’338 patent and the '779 patent.

On September 11, 2023, the Company filed a request for Director review of the PTAB’s decision not to institute review in the IPR for the ’779 patent.

On September 6, 2023, the parties stipulated to a stay of the district court litigation pending resolution of the instituted IPRs.

On November 7, 2023, the Director of the U.S.

Patent and Trademark Office delegated Director Review of the PTAB’s institution decision in the IPR for the ’779 Patent to the Delegated Review Panel (“DRP”) to determine whether to grant rehearing.

On February 21, 2024, the DRP issued a decision vacating the PTAB’s denial of institution of the IPR directed to the ’779 Patent and instructing the PTAB to reconsider institution.

The PTAB has indicated that a decision on institution for the IPR directed to the ’779 Patent will be issued by August 21, 2024.

On March 15, 2024, the parties entered into a partial settlement agreement, in which the parties agreed to, among other things:

(1) dismissal with prejudice of the claims relating to the ’439 patent;

and the ’822 patent;

and (2) DraftKings’ withdrawal of its IPRs with respect to the ’341 Patent, the ’969 Patent, and the ’822 Patent.

The dismissal and withdrawal both occurred on March 18, 2024.

Only the ‘779 Patent remains pending in the district court litigation.

The parties have stipulated to a stay of the district court litigation pending resolution of the IPR directed to the ‘779 Patent.

We intend to vigorously defend this case.

20 unchanged sentences

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome

in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

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On May 8, 2023, plaintiff Turley and a new plaintiff (Erik Ramos) filed a First Amended Class Action Complaint.

The plaintiffs assert claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment.

Among other things, plaintiffs seek statutory damages, monetary damages, punitive

damages, attorney fees and interest.

On June 12, 2023, DraftKings filed a motion to dismiss the claims asserted by both plaintiffs or, in the alternative, strike the flash draft allegations.

Plaintiffs filed an opposition on July 17, 2023.

On August 3, 2023, Defendant filed its reply, and the motion remains pending.

The plaintiffs assert claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment.

Among other things, plaintiffs seek statutory damages, monetary damages, punitive damages, attorney fees and interest.

The Company intends to vigorously defend this case.

Any adverse outcome in this matter could subject the Company to substantial damages and /or require alterations to the Company’s business.

The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

On August 3, 2023, Defendant filed its reply.

On March 29, 2024, the court granted DraftKings’ motion and dismissed plaintiffs’ complaint with prejudice.

Securities Matters Related to DraftKings Marketplace

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On September 25, 2023, defendants filed a motion seeking dismissal of this action.

On November 10, 2023, plaintiff filed an opposition to the motion to dismiss.

On December 11, 2023, defendants filed a reply memorandum in support of the motion to dismiss.

The Court heard oral argument on the motion to dismiss on December 19, 2023, and took the matter under advisement.

We intend to vigorously defend this case.

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Because this action alleges claims on behalf of the Company and purports to seek a judgment in favor of the Company, the Company does not believe, based on currently available information, that the outcome of the proceedings will have a material adverse effect on the Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

On December 8, 2023, plaintiffs Melissa Scanlon and Shane Harris, individually and on behalf of others similarly situated, filed a purported class action lawsuit against DraftKings in Middlesex County Superior Court of Massachusetts.

Among other things, Plaintiffs allege that the Company’s promotion that offered new customers an opportunity to earn up to 1,000 in site credits, and related advertisements, were:

(1) unfair or deceptive practices in violation of Massachusetts General Laws (“M.G.L.”) c.

93A, §§ 2, 9;

and (2) untrue and misleading advertising in violation of M.G.L.

The Plaintiffs are seeking, among other things, injunctive relief, actual damages, double or treble damages, and attorneys’ fees.

On January 16, 2024, DraftKings served a motion to transfer the case to the Business Litigation Session (“BLS”) of the Massachusetts Superior Court.

On February 5, 2024, Plaintiffs served their opposition to that motion.

On February 21, 2024, DraftKings filed its motion to transfer, Plaintiffs’ opposition, and a reply brief in support of the motion.

The Middlesex Court granted the motion subject to acceptance of the case by the BLS court on February 26, 2024, and the BLS court accepted the case on March 26, 2024.

On January 29, 2024, DraftKings served its Motion to Dismiss all of Plaintiffs’ claims.

On March 11, 2024, Plaintiffs served their opposition to that motion.

DraftKings served its reply brief on April 1, 2024, and the motion papers have been filed with the court, though the BLS has yet to open the case or set a date for oral argument.

The Company intends to vigorously defend this case.

Any adverse outcome in this matter could subject the Company to substantial damages and /or require alterations to the Company’s business.

The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

On April 17, 2024, plaintiff Samantha Guery, individually and on behalf of all others similarly situated, filed a purported class action lawsuit against DraftKings in the United States District Court for the Southern District of New York.

Among other things, Plaintiff alleges that the Company’s promotion that offered new customers an opportunity to place their first wager “risk free” was (1) “deceptive, unlawful, fraudulent, and unfair” in violation of New York General Business Law Section 349;

and (2) false advertising under New York General Business Law Section 350.

The plaintiffs are seeking, among other things, injunctive relief, actual damages, punitive damages, treble damages, and attorneys’ fees.

The Company intends to vigorously defend this case.

Any adverse outcome in this matter could subject the Company to substantial damages and /or require alterations to the Company’s business.

The Company cannot provide any assurance as to the outcome of this matter.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in this matter could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

In addition to the above actions, we are subject to various other legal proceedings and claims that arise in the ordinary course of business.

In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial condition, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially

affect our financial condition, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings