DraftKings Settles Lawsuit With Former Exec Who Fled to Fanatics

A lawsuit by DraftKings against Michael Hermalyn, the company’s former Senior Vice President of Growth, was recently settled, and terms were not disclosed.

What’s the Beef?

Only days before last year’s Super Bowl, Michael Hermalyn, DraftKings SVP of Growth, abruptly defected to rival sportsbook Fanatics, which triggered a lawsuit by his former employer for revealing trade secrets. The lawsuit was filed in Massachusetts District Court and subsequently in California, accusing Hermalyn of lying about the reason for his personal leave (death of a friend) and instead meeting with Fanatics’ executives in Los Angeles.

The Accusations

Although lying to gain employment with another firm does not form the basis of a lawsuit, what happened next did constitute legal action according to DraftKings. The suit levied by the Boston-based bookmaker against Hermalyn accused him of downloading sensitive and confidential information, including a spreadsheet of the company’s plans heading into the Super Bowl.

Hermalyn had signed a one-year non-compete clause that prohibited him from working in the gaming industry. However, Hermalyn had obtained a California license and established residency in the Golden State to circumvent the application of the non-compete agreement.

“Hermalyn would have this Court believe is that anyone with some spare cash and a phone can become a California resident in less time than the average trip to Disneyland,” the suit read.

DraftKings also accused Hermalyn of inappropriate conduct with female employees and recruiting DraftKings VIPs with whom he had relationships to conduct business with Fanatics while also attempting to poach DraftKings’ colleagues to join him at his new place of employment.

Although Fanatics was not named in the lawsuit, it did release a statement at the time:

“This is just sour grapes. DraftKings is understandably upset that one of its employees left for the greener pastures at Fanatics. The fact that they are trying to drum up ridiculous allegations on one of their well-respected executives in an attempt to ruin his reputation sheds some light on why employees may be choosing to leave that organization.”

Settling the Matter

The day after Christmas and only days before Hermalyn’s non-compete agreement was set to expire, DraftKings dropped the lawsuit.

“DraftKings, Fanatics, and Mr. Hermalyn engaged in multi-jurisdiction litigation related to Mr. Hermalyn’s departure from DraftKings and commencement of employment with Fanatics. All litigation between them has been settled and dismissed on confidential terms, and Mr. Hermalyn will abide by his contractual commitments to DraftKings,” said Russell Beck, a lawyer for Hermalyn at Beck Reed Riden, in a statement.

Fanatics has become a growing force in the mobile sports betting industry after acquiring the US assets and licenses of Australian gaming company PointsBet for $225 million in June 2023. Since that time, Fanatics has received regulatory approvals and licenses with subsequent sports betting launches in 22 states, as well as online casino operations in Michigan, New Jersey, Pennsylvania, and West Virginia.

A Cornell graduate, Michael Hermalyn remains employed at Fanatics and serves as the head of its office in Los Angeles.