FanDuel founders’ lawsuit survives New York dismissal bid

A New York court has allowed most of the claims brought by FanDuel’s founders, former employees and early investors over the company’s 2018 merger with Paddy Power Betfair to continue.

The decision does not establish that FanDuel was deliberately undervalued or that any defendant acted unlawfully. It does, however, mean that allegations involving fiduciary duty, fraud, conspiracy, secret commissions and the treatment of ordinary shareholders have survived another attempt to stop the case before the evidence is fully examined.

Eight years after the transaction, the basic question has still not disappeared: how did the people who founded and helped build FanDuel allegedly receive nothing from a deal that gave preferred shareholders an interest later sold for billions?

Court keeps central FanDuel claims alive

New York Supreme Court Justice Andrea Masley issued the decision on 9 July 2026, largely rejecting motions to dismiss the second amended complaint filed by FanDuel co-founders Nigel Eccles, Lesley Eccles, Thomas Griffiths, Robat Jones and Chris Stafford alongside more than 100 former employees, investors and other ordinary shareholders.

The plaintiffs brought ten causes of action. The court dismissed two of them, while allowing the remaining eight to proceed. The surviving claims include breach of fiduciary duty, unlawful means conspiracy, knowing receipt, fraud, secret commissions and aiding and abetting an alleged breach of fiduciary duty.

The decision is procedural rather than a finding of liability. At the dismissal stage, the court is required to examine whether the plaintiffs have pleaded legally recognisable claims, generally accepting their factual allegations as true for the purpose of deciding whether the case should continue.

That distinction matters. The ruling does not prove that the defendants manipulated the transaction, concealed conflicts or deprived ordinary shareholders of value. It means the court was not prepared to remove those allegations from the case before the next stages of litigation.

The valuation that left ordinary shareholders with nothing

The dispute centres on FanDuel’s 2018 combination with the US operations of Paddy Power Betfair, the company now known as Flutter Entertainment.

Under the transaction, Paddy Power Betfair was to own 60% of the newly combined business, initially referred to as PandaCo, while FanDuel’s shareholders would collectively receive the remaining 40%.

The difficulty was not simply the size of FanDuel’s stake. It was how that stake was valued and then distributed between FanDuel’s preferred and ordinary shareholders.

According to the court’s summary of the second amended complaint, FanDuel’s board relied on an implied enterprise value contained in an earlier term sheet when allocating the shares. The plaintiffs allege that this approach ensured the entire block of shares passed to preferred shareholders under FanDuel’s distribution waterfall, leaving the ordinary shareholders and option holders with no compensation.

The plaintiffs claim that the valuation was not based on an independent appraisal of the combined business or a fairness opinion. They allege that the board used a figure that corresponded closely with the amount required to satisfy the preferred shareholders’ priority rights, leaving no excess value to flow down to the ordinary shares.

These remain allegations. However, they form the central factual issue that the defendants have so far been unable to remove from the litigation.

PASPA decision changed the commercial context

The timing of the merger is one of the most important elements of the case.

Paddy Power Betfair and FanDuel signed a preliminary term sheet on 28 April 2018. On 14 May, the US Supreme Court struck down the Professional and Amateur Sports Protection Act, commonly known as PASPA, removing the federal restriction that had prevented most individual states from authorising sports betting.

FanDuel’s board voted on the merger on 22 May, eight days after the Supreme Court ruling. The contribution agreement was signed the following day.

The PASPA decision did not guarantee FanDuel’s future success. State-by-state licensing, technology, marketing expenditure and operational execution would still determine which companies succeeded in the newly opening market.

It nevertheless changed the commercial environment in which FanDuel was being valued. A major daily fantasy sports brand with millions of registered US users was suddenly positioned to enter a legal sports betting market that had barely existed nationally before the court’s decision.

The plaintiffs allege that financial models available to the defendants reflected this opportunity. The second amended complaint claims that an internal model prepared by then chief executive Matthew King valued FanDuel’s 40% interest in the combined business at more than $1.3 billion.

The court has not accepted that model as the correct valuation. It has only decided that the plaintiffs sufficiently pleaded a fraud claim concerning the valuation used in the transaction.

Defendants say FanDuel needed the deal to survive

The plaintiffs’ version is not the only account of FanDuel’s position in 2018. In their efforts to dismiss the amended complaint, the defendants argued that FanDuel was in serious financial difficulty and that the Paddy Power Betfair transaction represented the best available route to preserve the business.

Their filing accused Nigel Eccles of having mismanaged FanDuel before leaving the company. It cited losses of $38.8 million for 2017, accumulated losses of approximately $232 million and negative EBITDA of $21.3 million.

The defendants have argued that they were economically aligned with ordinary shareholders because they also held ordinary shares and would therefore have benefited from achieving a higher valuation. They maintain that the merger was the only viable lifeline available to FanDuel at the time.

KKR and Shamrock Capital previously described the lawsuit’s allegations as baseless and said they had supported FanDuel during a difficult period.

Those arguments cannot be ignored simply because FanDuel subsequently became enormously valuable. A company’s later success does not automatically prove that its shares were undervalued years earlier. The relevant legal and financial question concerns the information available, the valuation process used and the duties owed at the time of the transaction.

Eight claims survive but two are dismissed

The July ruling was a substantial result for the plaintiffs, but it was not a complete victory. Justice Masley dismissed the second cause of action, which alleged oppression of minority shareholders under Scots law. The court concluded that the statutory remedy relied upon must be pursued through the courts in Scotland under the UK Companies Act 2006.

The dismissal was therefore based on jurisdiction. The New York court did not decide whether the underlying allegations of unfair treatment were factually correct.

The fifth cause of action, alleging breach of contract between shareholders, was also dismissed. The plaintiffs argued that KKR and Shamrock improperly exercised contractual drag-along rights to force other shareholders into the transaction.

The court found that the relevant provisions of FanDuel’s Articles of Association required the transaction terms to have been negotiated with an unconnected third party. As the complaint itself acknowledged that negotiations with Paddy Power Betfair had taken place, the court was not persuaded that the contractual requirement had been breached.

A related claim nevertheless remains alive. The sixth cause of action alleges that KKR and Shamrock exercised their contractual discretion in an arbitrary or capricious manner. Justice Masley concluded that whether the drag-along rights were exercised in bad faith was a factual question that should not be decided through a motion to dismiss.

Fraud and secret commission claims remain in the case

The court also refused to dismiss fraud claims concerning the value assigned to the shares in the combined company.

The plaintiffs allege that FanDuel directors knew the figure used in the transaction was not based on an independent valuation and did not properly reflect the sports betting opportunity created after PASPA was overturned.

The defendants disputed whether the statements at issue were false and argued that the plaintiffs had not shown reasonable reliance. The court found that the allegations were sufficient at this stage and allowed fraud claims under Scots law and New York law to continue.

A separate claim involving alleged secret commissions also survived. The complaint alleges that certain payments or benefits received by former FanDuel directors Carl Vogel and David Nathanson were not properly disclosed and created conflicts of interest.

The court did not decide that secret payments were made. It found that factual questions remained over whether the board was properly informed of the arrangements and whether the benefits created conflicts with duties owed to FanDuel or its shareholders.

Nigel Eccles has publicly described the complaint as including bribery allegations. The formal claim before the court is described as secret commissions under Scots law. Malta Media has found no criminal bribery charge arising from the transaction and the civil allegations remain unproven.

FanDuel’s later valuation sharpens the question

The most striking contrast in the case is the difference between the value assigned to FanDuel’s interest in 2018 and the amounts paid for the business later.

In December 2020, Flutter agreed to acquire approximately 37.2% of FanDuel from Fastball Holdings for $4.175 billion. Flutter said the transaction implied a total FanDuel valuation of approximately $11.2 billion.

In 2025, Flutter reached a further agreement to acquire Boyd Gaming’s remaining 5% stake. That deal placed an implied valuation of approximately $31 billion on FanDuel and took Flutter’s ownership to 100%.

Those later valuations cannot be transported backwards and treated as proof of what FanDuel was worth in May 2018. The US sports betting market expanded considerably in the intervening years and FanDuel’s management, technology, products and marketing all contributed to its growth.

They do, however, explain why the 2018 allocation remains so contentious. Preferred shareholders retained the economic interest in the combined company, while the founders, employees and other ordinary shareholders say their interests were valued at zero.

When the retained interest was sold for billions only two years later, the dispute stopped looking like a disagreement over a struggling start-up and became a much larger argument about who was entitled to participate in the value created by one of the US gambling market’s defining transactions.

New York’s highest court had already revived the case

The July 2026 decision is the latest stage in a legal battle that has repeatedly changed direction. The New York action was filed in February 2020. Parts of the original complaint survived an initial dismissal application in 2022, but the Appellate Division later reversed that outcome and dismissed the remaining claims.

In May 2024, the New York Court of Appeals, the state’s highest court, revived the lawsuit. It held that Scots law governed the internal corporate issues because FanDuel had been incorporated in Scotland, but found that the plaintiffs had still pleaded sufficient facts to support a limited fiduciary duty.

The court focused on the combination of the distribution waterfall and the drag-along rights held by KKR and Shamrock. It found that the directors’ power to negotiate the merger and value the non-cash consideration could create a limited duty not to undermine the ordinary shareholders’ interests for their own benefit.

Following that decision, the plaintiffs filed their significantly expanded second amended complaint in August 2024. The defendants again sought dismissal, leading to the decision issued this month.

A dismissal refusal is not a trial victory

It would be wrong to present the ruling as proof that FanDuel’s founders were cheated. The court has not conducted a trial, assessed every disputed document or made final findings about the credibility of witnesses. The defendants will have opportunities to answer the complaint, challenge the evidence and seek judgment at later stages.

It would be equally wrong to describe the litigation as a speculative grievance that has already been rejected. New York’s highest court revived the central fiduciary-duty claim in 2024 and the trial court has now allowed eight causes of action in the expanded complaint to proceed.

The case has survived because the allegations, taken in the manner required at this stage, are legally sufficient and raise factual questions that cannot be resolved simply by examining the transaction documents selected by the defendants.

That is not a final victory. It is permission to continue asking questions that some of the gambling industry’s most powerful investors and executives have spent years trying to prevent from reaching a fuller evidential examination.

What happens next

The court ordered the defendants to answer the second amended complaint by 31 July 2026.

The parties must also submit an updated proposed discovery schedule by 24 July. Discovery could involve further exchanges of documents, testimony and examination of the valuation process, board discussions, financial models and compensation arrangements surrounding the merger.

A trial is not inevitable. The case could still be narrowed, settled or resolved through later motions. Separate arbitration proceedings involving Nigel Eccles and his 2017 separation agreement have also added another layer to the dispute.

For now, however, the central FanDuel case remains alive.

The commercial success of FanDuel is no longer in dispute. What remains disputed is whether the people who originally built the business were treated fairly when control of its future value was allocated in 2018.

Sources

1. New York Supreme Court, Eccles v Shamrock Capital Advisors, Decision and Order dated 9 July 2026, NYSCEF Document 828.
2. Second Amended Complaint, Eccles v Shamrock Capital Advisors, filed August 2024, NYSCEF Document 384.
3. New York Court of Appeals, Eccles v Shamrock Capital Advisors, decision dated 23 May 2024.
4. US Supreme Court, Murphy v National Collegiate Athletic Association, decision dated 14 May 2018.
5. Flutter Entertainment, accelerated acquisition of 37.2% of FanDuel from Fastball Holdings, December 2020.
6. Flutter Entertainment, acquisition of Boyd Gaming’s remaining FanDuel stake, July 2025.
7. Gambling Insider, “Nigel Eccles’ FanDuel Lawsuit Clears Major Hurdle as Judge Lets Core Claims Proceed”, 16 July 2026.
8. Front Office Sports, “FanDuel Founders Expand Lawsuit Against Board Members Who Sold Company”, 14 August 2024.
9. iGaming Business, “FanDuel founders case: Defendants say Eccles mismanaged company into the ground”, 27 September 2024.

Legal Sports Report, “Filing Claims FanDuel Founder Eccles Nearly Destroyed Company”, 2 October 2024.

FAQs

What is the FanDuel lawsuit about?
The lawsuit concerns allegations that FanDuel founders, former employees and early investors were unfairly excluded from receiving value during the company's 2018 merger with Paddy Power Betfair.

Did the New York court rule that FanDuel acted unlawfully?
No. The court did not determine liability. It only ruled that several claims were legally sufficient to continue through the litigation process.

Why is the 2018 FanDuel merger controversial?
The dispute focuses on how FanDuel was valued and how shares were distributed, with ordinary shareholders claiming they received no compensation while preferred shareholders benefited significantly.

Who filed the lawsuit?
The case was filed by FanDuel co-founders Nigel Eccles, Lesley Eccles, Thomas Griffiths, Robat Jones, Chris Stafford, along with more than 100 former employees, investors and other shareholders.

What claims remain in the lawsuit?
The surviving claims include breach of fiduciary duty, fraud, unlawful conspiracy, secret commissions, knowing receipt and aiding and abetting alleged breaches of fiduciary duty.

Why is the PASPA decision important in this case?
The repeal of PASPA in May 2018 opened the US sports betting market, potentially increasing FanDuel's value just before the merger was approved.

How is Flutter Entertainment connected to the case?
Flutter Entertainment, formerly Paddy Power Betfair, acquired control of FanDuel through the 2018 transaction that is at the centre of the lawsuit.

Does FanDuel's later valuation prove it was undervalued in 2018?
No. Later valuations do not automatically prove the company was undervalued at the time of the merger, although they have intensified the dispute.

What happens next in the legal proceedings?
The defendants must respond to the complaint, discovery will continue and the case may proceed toward trial unless it is settled or resolved through later motions.

Could the case still be dismissed?
Yes. Although key claims survived the motion to dismiss, the defendants may still challenge the allegations during later stages of the litigation.