DraftKings Sues Ex-Executive Over Fanatics Move

Article ByDavid Weir

February 7, 2024

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Posted in: US Gambling News, California Gambling News, Massachusetts Gambling News, US Sports Betting News

Former DraftKings SVP of VIP Michael Hermalyn is being sued by the operator over allegations he leaked information to rival sportsbook Fanatics before taking up employment there.

The Boston-based DraftKings filed a 49-page suit in Massachusetts this week. It alleges that Hermalyn spent a year secretly amassing information on DraftKings’ operations in order to use it to his advantage in contract negotiations for a new position at Fanatics.

They also say the quick nature of Hermalyn’s move to a competitor broke a noncompete clause in his contract.

Hermalyn “hatched a secret plan over the past year to steal and use confidential information, solicit customers and employees, and join a key competitor, Fanatics, Inc. (“Fanatics”), in brazen violation of his agreements with and duties to DraftKings,” the lawsuit reads.

Hermalyn denies the allegations. He is also currently suing DraftKings over the noncompete clause, saying that he now lives in California, making the clause void.

Fanatics has not officially commented. However, reports on the lawsuit said Fanatics claims the allegations were nothing but “sour grapes” from DraftKings.

The Allegations

Hermalyn previously led DraftKings’ VIP team for nearly three years, since 2021.

In that time, the suit says, he had access to valuable, secret, and sensitive trade secrets. That included data such as VIP or heavy spending customer identities, betting habits, personal information, and custom notes on strategies to keep them loyal.

The extensive document alleges that Hermalyn quit his role at DraftKings as recently as last week. Within days, he had taken up a similar position at Fanatics.

The suit accuses Hermalyn of going so far as to fake a friend’s death in early January. He reportedly told colleagues he was flying to Pennsylvania for a close friend’s funeral, but actually flew to California, where he personally negotiated his new position with Fanatics owner Michael Rubin.

It also alleges that Hermalyn specifically timed his exit just before the start of prime football betting action ahead of the upcoming Super Bowl. Lawyers say he knew full well this would be a highly damaging time for DraftKings and potentially profitable for Fanatics.

Despite Hermalyn filing his own suit from California, DraftKings also says the new Fanatics executive definitely does not live in the Golden State, and merely arranged residence there to skirt his contract’s noncompete agreement.

“On information and belief, Hermalyn, acting in concert with Fanatics, timed his departure and theft of confidential information to coincide with the critical days leading up to the Super Bowl,” the lawsuit says.

DraftKings’ Demands

DraftKings has asked the U.S. District Court for Massachusetts to restrain Hermalyn from providing any services to Fanatics, at least until the matter is resolved. It also seeks monetary damages from its former exec, and a restraining order from using any information he obtained from his role in any other employment in the future.

This is not the first time the upstart Fanatics Sportsbook, which only really began expanding in 2023, has locked horns with DraftKings.

In mid-2023, Fanatics was attempting to acquire the U.S. operations of Australian operator PointsBet. DraftKings disrupted the process with a $195 million offer, forcing Fanatics to up its bid to $225 million. That was eventually accepted, with the sports merchandiser turned sportsbook taking over PointsBet’s operations in September.

However, speculation is that DraftKings was not particularly serious with their bid, and they merely wanted to drive up the market entrance price for a new competitor.

Interestingly, the new lawsuit echoes another brought against Fanatics in mid-2023. The trading card maker Panini America is currently suing Fanatics for poaching its employees and attempting to interfere with their existing contracts.

No judge has yet been set for this case between DraftKings and their former employee.