Fanatics founder and CEO Michael Rubin at his office in Latest York.
The Washington Post | Getty Images
Sports merchandise giant Fanatics is firing back against sportsbook giant DraftKings in an ongoing legal fight over Fanatics’ hiring of a top DraftKings executive.
In a legal temporary filed late Thursday in U.S. District Court in Massachusetts, Fanatics accuses DraftKings of distorting reality and character assassination of its former senior vp of business development, Michael Hermalyn.
In February, Hermalyn accepted a position because the president of Fanatics VIP and head of Fanatics’ Los Angeles office. He reports on to CEO Michael Rubin.
DraftKings is suing Hermalyn in federal court, arguing he downloaded confidential company documents and tried to recruit other employees away from DraftKings.
Fanatics alleges in its filing that DraftKings has a “culture of retribution” and is making an example of Hermalyn to instill fear in other “DK employees seeking to jump ship.”
By its count, 186 DraftKings employees have applied to work at Fanatics because the company announced in 2021 it will launch a sportsbook, in line with the filing.
Within the rapidly expanding sports gambling industry, Fanatics is the newcomer, late to the sport but backed by billionaire Rubin and an enviable database of consumers who buy team jerseys and ball caps online or sports memorabilia through its collectibles business.
The doorway from the elevators, designed to resemble a tunnel entering a stadium, is pictured on the DraftKings office in Boston.
David L. Ryan | The Boston Globe via Getty Images
DraftKings ranks No. 2 in sports betting market share, behind FanDuel, which is owned by Flutter. But those two leaders dominate, with roughly 80% market share between them.
And the competition is fierce — with even well-known gambling brands like Caesars and BetMGM fighting for purchasers’ dollars. They’re investing in technology to enhance their apps, individualize marketing and promotions, and make deposits and withdrawals easier. Much of that’s proprietary.
But sports gamblers are notoriously promiscuous. They chase promotions or the perfect odds and lots of have a couple of betting app downloaded on their phones.
The most beneficial customers, the VIPs, work with casino or sportsbook hosts, who construct relationships and take a look at to engender loyalty.
DraftKings alleges Hermalyn reached out to one in every of DraftKings’ most beneficial customers to alert him that Hermalyn could be leaving his employer.
“The evidence against Mr. Hermalyn is open-and-shut. He stole worthwhile trade secrets, destroyed evidence to cover his tracks after which lied about all of it,” said Orin Snyder, an attorney with Gibson Dunn representing DraftKings, in an announcement to CNBC on Thursday.
In a temporary filed March 14, DraftKings details what it describes as corporate espionage. Fanatics, it insists, is attempting to steal its VIPs, its worthwhile employees and its technique to clone DraftKings’ business.
Fanatics in its response vehemently denies those allegations, and says DraftKings is intentionally distorting reality and interesting in character assassination.
“To be clear, this just isn’t a case wherein an worker was hired to maneuver a book of business from one company to a different: Fanatics already has 100 million customers within the U.S., each of DK and Fanatics have tens of 1000’s of VIP customers, and it’s well-known that many if not all those customers overlap,” the corporate said in its filing.
DraftKings had petitioned the court to maintain Hermalyn from working for Fanatics. The judge declined that petition but issued a brief restraining order to maintain Hermalyn from soliciting clients or employees from his former employer.
