Derby Wars Reaches Settlement with Stronach Group

A federal judge dealt a serious blow to Derby Wars two months ago in its case against the Stronach Group, but Derby Wars will continue operating. The daily fantasy horse racing site reached an agreement with the Stronach Group to settle the lawsuit and bring the matter to an end.

The Daily Racing Form reports that the terms of the settlement will have Derby Wars pay a total of $500,000 to the Stronach Group and seek permission from Stronach-owned race tracks to offer daily fantasy contests involving races taking place at those tracks. Derby Wars has agreed to pay $250,000 upfront, with monthly payments of $20,833 until the full $500,000 settlement has been met.

The settlement allows Derby Wars to avoid going to a trial to determine total damages due to the Stronach Group. After a federal judge ruled in May that Derby Wars fantasy contests are horse racing wagers and therefore subject to the Interstate Horseracing Act, Derby Wars had almost no case and wisely opted to settle.

Changes at Derby Wars

The good news is Derby Wars will continue to operate mostly as normal from the players’ point of view. One major change behind the scenes is Derby Wars will now seek explicit permission from every racetrack prior to hosting fantasy contests involving races held at that track.

Derby Wars actually started down this path last year when it reached an agreement with Hawthorne Race Course. In the agreement, Derby Wars contributes a percentage of contest revenues collected from contests involving Hawthorne races to local purses in return for Hawthorne granting Derby Wars access to racing data and allowing the site to broadcast live racing video from the track.

The deal with Hawthorne served as a preview as to what future agreements will look like now that Derby Wars has been classified as a wagering service. Derby Wars founder Mark Midland said that the company will be looking forward to making more deals moving forward:

“The Horse Racing Labs [parent company of Derby Wars] team is made up of lifelong, passionate racing fans, whose goal is to grow horse racing through new ideas and products. While we were disappointed in the ruling, the benefit is that the ruling has set a clear path for horse racing contest operators to proceed under the Interstate Horseracing Act.

“We are immediately signing new agreements with tracks and we see a bright future for contests as we commit our team and sources to driving innovation in horse racing to benefit all.”

Mark Midland also said the following in a statement on the settlement:

“While we (and the DFS industry) were disappointed in the recent court ruling in this case, the benefit is that the ruling has set a clear path for horse racing contest operators to proceed under the Interstate Horse Racing Act.  To avoid further legal action and business disruption, DerbyWars has settled with the Stronach Group to end the litigation.  From this point forward, DerbyWars will only run contests using races from tracks with which we have content agreements, and we highly encourage other contest sites to adopt the same policy.”

“With these changes, DerbyWars is positioned to continue to grow and be a leading innovator in contests and the horse racing industry. We are immediately signing new agreements with tracks and we see a bright future for contests as we will continue to commit our team and resources to driving innovation in horse racing to benefit all.”

Scott Daruty of the Stronach Group also said their company is not opposed to working out similar deals with contest operators such as Derby Wars:

“We intend to immediately begin working with selected licensed handicapping contest operators to establish a business model, under which they can offer these contests to their customers using Stronach content while ensuring that the race tracks and horsemen putting on the show receive adequate compensation for the racing content they are creating.”

A Quick Rebound and Additional Agreements Reached

Shortly after the settlement, Derby Wars announced that it has secured additional agreements permitting the site to host contests involving races held or managed by the NYRA, Monmouth Park, the Meadowlands, Ellis Park, Kentucky Downs, Louisiana Downs and Fairmount Park.

In similar fashion to last year’s agreement with Hawthorne, these deals will allow Derby Wars to host contests involving races at those tracks and provide live racing video online in return for participating in revenue-sharing agreements. These deals appear to be mutually beneficial as they permit Derby Wars to provide an enhanced customer experience while also contributing to the growth of the sport through revenue sharing and exposure online.

So, it’s not all bad news for Derby Wars. The settlement was expensive, but it could have been worse and Derby Wars appears to have rebounded quickly. The other positive to take away from this case is the legal clarity it provides for Derby Wars and other horse racing contest sites moving forward.