Baltimore’s lawsuit against DraftKings sent back to state court

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A Maryland federal judge last week sent Baltimore City’s lawsuit against the digital sports-betting companies DraftKings and FanDuel back to state court, where all agree the city has an advantage.

U.S. District Judge Stephanie Gallagher on Nov. 10 remanded the case to Baltimore City Circuit Court, where the city initially sued in April.

The lawsuit argues the companies, which offer easy-to-use mobile gambling apps, target and exploit problem gamblers in violation of the local Consumer Protection Ordinance, which prohibits “unfair, abusive, or deceptive trade practices.” The city is asking for civil fines and injunctive relief, but not damages.

After the city filed, the defendants removed the case to federal court; the city asked Gallagher to remand.

“Maryland’s state courts are far better equipped to address, in the first instance, the complex state law issues and interests presented in this scenario,” Gallagher wrote.

The city enacted the consumer protection ordinance soon after Maryland legalized and regulated online sports gambling in 2020. Gallagher wrote that it wasn’t the federal judiciary’s role to figure out how the city law interacts with the state law.

The companies’ effort to remove the case to federal court, Gallagher wrote, “essentially asks this federal court to put its thumb on the scale regarding the City’s efforts to alter Maryland’s online gambling regulatory framework.”

“By defining, in the first instance, the meaning of terms like ‘unfair’ and ‘deceptive’ in the context of the growing market of online gambling, this Court would be removing those decisions from the purview of the state courts before they have had any opportunity to weigh in on the CPO.”

But the debate over where the case should take place is not settled. The sportsbooks appealed Gallagher’s decision to the U.S. Court of Appeals for the Fourth Circuit. Litigation over the merits of the city’s claims won’t begin until that is resolved.

Spokespeople for DraftKings, FanDuel and Baltimore Mayor Brandon Scott declined to comment.

A FanDuel spokesperson added, “We are confident the company operates in accordance with all laws, including those established and enforced by the State of Maryland’s Lottery and Gaming Control Commission.”

Chicago-based lawyers from DiCello Levitt are representing Baltimore alongside the city law department.

Flutter Entertainment and DraftKings are represented by Covington & Burling, Baker Donelson, and the San Francisco firm Coblentz Patch Duffy & Bass.

This is not the only sports-betting litigation ongoing in Maryland.

The prediction market Kalshi — which argues that it is a “designated contract market,” not a sportsbook like FanDuel or DraftKings — sued the state agency that regulates sports gambling after the agency sent a cease-and-desist order.

Kalshi has close ties to the Trump administration and argues it should be regulated by the federal Commodity Futures Trading Commission, not by state gambling agencies. The state argues Kalshi’s “event contracts” are “indistinguishable” from sports bets.

Kalshi is appealing after a Maryland federal judge in August denied its request for a preliminary injunction.

Crypto.com filed a lawsuit similar to Kalshi’s; that case is paused until Kalshi’s appeal is resolved.