Antitrust Law Daily Wrap Up, RICO—N.D. Cal.: RICO claims against online sports platform DraftKings dismissed, (Jul 31, 2026)

By Brian Craig, J.D.

The public policy against gambling loss recovery bars the claims to the extent they seek recovery of their losses in any form.

The federal district court in San Francisco, California has dismissed claims brought under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by gamblers seeking damages against the online fantasy sports platform for DraftKings, but the court also concluded that some California state law claims can proceed seeking injunctive relief. In granting the motion to dismiss the RICO claims, the court held that the public policy in California against gambling loss recovery bars the claims to the extent they seek recovery of their losses in any form. The court held, however, that the gamblers may still seek injunctive declaratory relief that DraftKings offers illegal gambling based on their surviving claims under California state law (Zhen v. DraftKings, Inc., No. 3:25-cv-04618-CRB (N.D. Cal. Jul. 29, 2026)).

Two gamblers that lost money with the online fantasy sports platform for DraftKings filed a proposed class-action lawsuit against DraftKings, the platform’s executive officers in their individual capacity, and Crown Gaming, Inc. Crown Gaming is a subsidiary of DraftKings that designed and maintained software solution. One gambler alleges that he lost approximately $1,700 and another gambler alleges he lost approximately $1,600. The complaint alleges that DraftKings offered illegal gambling in violation of the RICO and California state law. The gamblers assert claims under RICO, California’s Unfair Competition Law (“UCL”), the California Consumer Legal Remedies Act (“CLRA”), and related claims. The gamblers seek declaratory relief and damages. DraftKings and Crown Gaming moved to dismiss.

Standing. The court first held that the gamblers satisfied the requirement for statutory standing under the RICO, UCL, and CLRA claims. Both gamblers clearly allege they only bet on the DraftKings platform based on DraftKings’ representations that the services it offered in California were legal. And if they knew the truth, the gamblers would not have spent their money on DraftKings’ contests.

Public policy. Next, the court held that the public policy against gambling loss recovery bars the claims to the extent they seek recovery of their losses in any form. The gamblers fail to point to any statute specifically authorizing recovery of gambling losses. Instead, they merely argue that the UCL and CLRA are broad enough to cover online gambling. But the court held that the gamblers fail to identify language in the UCL or CLRA that permits recovery of gambling losses. The public policy against gambling loss recovery bars the claims to the extent they seek recovery of their losses in any form, whether it is damages or restitution, the court found.

CLRA claim. The court concluded, however, that the CLRA claim can move forward. The court recognized that the public policy doctrine is only concerned with gambling losses and debts. The doctrine does not so extend as to prohibit public injunctive and declaratory relief for gambling based on deceptive advertising. Thus, the claims seeking injunctive and declaratory relief can move forward. The gamblers chronicle how DraftKings’ contests work, how they held their contests out as lawful in California, how online sports betting is purportedly illegal in California, how Plaintiffs got involved with DraftKings, how the gamblers relied on DraftKings’ representations, and how DraftKings gets a cut of every betting prize pool. And the gamblers explain how DraftKings itself pushed a proposition to legalize online sports betting in California, raising the inference that DraftKings was aware its games were not legal at the time. Thus, the CLRA claim seeking injunctive relief can proceed.

Statute of limitations. The court reserved for later the defense based on the statute of limitations. DraftKings argues that the claims are time-barred, as one of the gamblers alleges he began using his DraftKings account in 2019, which is outside the relevant statutes of limitations. The fantasy sports gambling platform countered that the gambler continued to use DraftKings’ platform into 2025 and that each bet restarts the statute of limitations. Where the statute of limitations question turns on factual issues that may be disputed, the question is more appropriately addressed at a later stage of the proceeding. Thus, the court will wait after some discovery to consider the statute of limitations defense.

RICO. Without a substantive RICO violation, the RICO conspiracy claim also fails. It is well established that there can be no RICO conspiracy without having committed a RICO violation. Consequently, the court dismissed the RICO claims.

Accordingly, the court granted, in part, the motion to dismiss sought DraftKings. Furthermore, the court granted the motion to dismiss sought by Crown Gaming based on RICO claims. Concluding that the claims are futile, the court dismissed the RICO claims with prejudice but allowed the remaining California state law claims to move forward.

The Case is No. 3:25-cv-04618-CRB.

Judge: Breyer, C.

Attorneys: Margot P. Cutter(Cutter Law P.C.) for Zhicheng Zhen and Jonathan Smith. Christopher James Wiener (Coblentz Patch Duffy & Bass LLP) for DraftKings, Inc.

Companies: DraftKings, Inc.

Cases: Advertising RICO CaliforniaNews