DraftKings fended off California players who wanted their gambling losses back. But the judge kept alive the one claim that could shut its paid fantasy contests statewide.
- The judge wiped out, with prejudice, every DraftKings claim seeking to recover California players’ gambling losses.
- The basis: California courts won’t help anyone reclaim money lost gambling, whether it is cast as damages or as restitution.
- Left standing are the declaratory and injunctive claims, the pair that could switch off paid daily fantasy statewide.
- Every RICO count fell, including those against the executives and Crown Gaming, which the court found not distinct from DraftKings.
SAN FRANCISCO — A federal judge has permanently barred California players from recovering the money they lost on DraftKings, while keeping the case alive on the one claim that could shut the company’s paid fantasy contests off across the state: a request for a court order declaring the contests illegal and blocking them.
What The Order Threw Out
In the order in Zhen v. DraftKings, entered July 29 in the Northern District of California, the court granted DraftKings’ dismissal motion in part and granted the separate motion from subsidiary Crown Gaming Inc. and three company executives in full. U.S. District Judge Charles R. Breyer had tipped the result from the bench a week earlier, telling the lawyers he expected to let the suit continue.
The decisive point is a California rule that shuts the courthouse door on gambling-loss recovery. Under the state’s in pari delicto doctrine, laid out in Kelly v. First Astri Corp., a court will not help a player win back money lost in a game the law forbids unless some statute authorizes it. Plaintiffs ZhiCheng Zhen and Jonathan Smith pointed to no such statute, and Breyer concluded that neither the Unfair Competition Law nor the Consumer Legal Remedies Act supplies one.
The public policy against recovering gambling losses, he wrote, blocks the plaintiffs’ claims “in any form, whether it is damages or restitution.”
That knocked out the net-loss claims under both consumer laws, the claim resting on the Statute of Anne by way of California Civil Code section 22.2, the civil-theft count under Penal Code section 496, and the RICO damages claims. Zhen said he had dropped about $1,000 on DraftKings plus $400 on Pick6 since Feb. 12, 2025; Smith put his losses at roughly $1,700 going back to May 2019. None of it can be recovered, and because reworking the claims would be pointless, the dismissals are permanent.
Why The Injunction Survived, And Got Easier
DraftKings had separately contended the court held no equitable jurisdiction because the plaintiffs still had an adequate legal remedy. The loss-recovery ruling turned that argument on its head. Once the damages claims fell away, the plaintiffs were left with nothing but declaratory and injunctive relief, so equitable jurisdiction attached.
Breyer drew a tight line around the public-policy bar: it covers gambling losses and debts, and no further. It does not reach a request for public injunctive and declaratory relief aimed at gambling that was sold through deceptive advertising, remedies the judge noted the UCL and CLRA specifically authorize.
He then ruled the plaintiffs could pursue that injunction, judging the danger of being burned again genuine. No court, state or federal, has actually declared online fantasy sports betting unlawful in California, the order observes, and the state Department of Justice has filed nothing since Bonta promised DFS enforcement. DraftKings, meanwhile, keeps telling the public it operates in California. In a footnote, Breyer swatted away the company’s logic as self-defeating, since it would mean the simple act of suing wiped out a plaintiff’s standing.
The order also records what DraftKings chose not to argue. At this stage the company did not claim its California business is legal, so the judge assumed, on the allegations, that online sports betting is currently unlawful in the state.
The Other Losses For DraftKings
Breyer waved off the company’s claim that the plaintiffs lost nothing because they got what they paid for, writing that the real question is “whether they would have entered the bargain in the first instance.”
He likewise rejected the idea that fantasy contests escape the CLRA’s definition of a service, noting the definition would obviously capture a flesh-and-blood bookmaker at a racetrack and that going digital changes nothing. He found the fraud allegations cleared Rule 9(b) and put off DraftKings’ statute-of-limitations challenge to Smith’s claims until the parties do some discovery.
The company did bank one clean win apart from the loss claims. Breyer tossed the freestanding Declaratory Judgment Act count, since declaratory relief is a remedy rather than its own cause of action, though the plaintiffs can still seek it on the claims that remain. Their case turns on Penal Code section 337a, the provision Bonta’s July 3, 2025 opinion found the paid contests offered by California DFS sites violate.
The Executives And Crown Gaming Walk
The RICO claims against Crown Gaming and the three DraftKings officers, chief executive Jason Robins along with Matthew Kalish and Paul Liberman, were dismissed outright. A RICO enterprise has to be separate from the RICO “person,” and the judge held that a company, its wholly owned subsidiary, and its own officers are not separate enough from one another to qualify. The section 1962(d) conspiracy count went down with the underlying claim.
On personal jurisdiction, only Robins cleared the bar among the individuals; the court said the case against Kalish and Liberman merely pinned DraftKings’ own contacts on its officers. Robins was reachable for having publicly promoted the company in California after Proposition 27 went down, and Crown Gaming for coding the platform that put the contests in front of Californians. Neither survived once the distinctiveness problem sank the RICO theory.
What Comes Next
The surviving declaratory and injunctive claims are now the only route to a statewide shutdown of paid fantasy contests, and the case comes down to a single question: whether those contests are illegal gambling under California law. The parties owe the court a joint status report by Aug. 10 and are due for a Zoom status conference on Aug. 14 at 10 a.m. It is the live front in the long fight over gambling in California.