Fanatics founder and CEO Michael Rubin in his office in New York.
The Washington Post | Getty Images
The sporting goods giant Fanatics is hitting back against the sports betting giant DraftKings in an ongoing legal battle over Fanatics’ hiring of a top executive DraftKings Executive.
In a legal brief filed late Thursday in U.S. District Court in Massachusetts, Fanatics accuses DraftKings of distorting reality and character assassinating its former senior vice president of business development, Michael Hermalyn.
In February, Hermalyn accepted a position as president of Fanatics VIP and head of Fanatics’ Los Angeles office. He reports directly to CEO Michael Rubin.
DraftKings is suing Hermalyn in federal court, alleging that he downloaded confidential company documents and attempted to poach other DraftKings employees.
Fanatics claims in its filing that DraftKings fosters a “culture of retaliation” and makes an example of Hermalyn to instill fear in other “DK employees who want to jump ship.”
According to the data, 186 DraftKings employees have applied to Fanatics since the company announced the launch of a sports betting operator in 2021.
In the fast-growing sports gambling industry, Fanatics is the newcomer, late to the game but backed by billionaire Rubin and an enviable database of customers who buy team jerseys and ball caps online or sports memorabilia through its collectibles business.
The entrance to the elevators, which resembles a tunnel leading into a stadium, is pictured at the DraftKings office in Boston.
David L. Ryan | The Boston Globe via Getty Images
DraftKings ranks No. 2 in sports betting market share, behind owned FanDuel Flutter. But these two market leaders dominate with a market share of around 80%.
And the competition is fierce – even from well-known gaming brands like Caesars And BetMGM fight for customers’ money. They invest in technology to improve their apps, customize marketing and promotions, and make deposits and withdrawals easier. Much of it is proprietary.
But sports bettors are notoriously promiscuous. They are looking for promotions or the best odds and many have more than one betting app downloaded to their phone.
The most valuable customers, the VIPs, work with casino or sportsbook operators who build relationships and try to create loyalty.
DraftKings alleges that Hermalyn contacted one of DraftKings’ most valuable customers to inform him that Hermalyn would be leaving his employer.
“The evidence against Mr. Hermalyn is obvious. He stole valuable trade secrets, destroyed evidence to cover his tracks, and then lied about everything,” Orin Snyder, an attorney at Gibson Dunn who represents DraftKings, said in a statement to CNBC on Thursday.
In a brief filed March 14, DraftKings details what it calls economic espionage. Fanatics, the company insists, is trying to steal its VIPs, its valuable employees and its strategy to clone DraftKings’ business.
In its response, Fanatics vehemently denies these allegations and says DraftKings is intentionally distorting reality and engaging in character assassination.
“To be clear, this is not a case where an employee was hired to transfer a business asset from one company to another: Fanatics already has 100 million customers in the US, DK and Fanatics each have tens of thousands of VIP customers, and “Many, if not all, of these customers are known to overlap,” the company said in its filing.
DraftKings had asked the court to stop Hermalyn from working for Fanatics. The judge denied that request but issued a temporary restraining order to stop Hermalyn from soliciting clients or employees of his former employer.
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2024-03-22 12:57:12
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