DerbyWars reaches fee agreement with Hawthorne

DerbyWars, the Louisville, Ky.-based company that offers daily fantasy contests on horse races, has reached an agreement with Hawthorne Race Course near Chicago that will pay the track a fee for contests that include Hawthorne’s races, according to officials.

The agreement is the first that DerbyWars has acknowledged reaching with a racetrack providing the track a portion of the revenue from its contest fees. Last year, DerbyWars was sued by The Stronach Group, a racing company that owns Santa Anita Park and Gulfstream Park, for allegedly violating federal law by offering the contests without agreements from tracks on simulcast rights.

Mark Midland, a co-founder and the chief executive of DerbyWars, said on Friday that DerbyWars has already reached out to other racetracks to reach similar agreements, but he said the suit from The Stronach Group was not the main impetus to reaching those deals.

“That’s always been our goal,” said Midland. “We see working with racetracks as important to growing contests. Partnering with the tracks is a natural way to do that.”

Midland would not disclose the financial terms of the agreement with Hawthorne but said the track would split its cut of the revenue from the contests with its horsemen. The contract covers the 2016 calendar year and applies to both Thoroughbred and harness racing, Midland said.

DerbyWars was launched in 2011 and has occupied a small niche in the larger racing world since then. Every day, the company’s website offers a variety of racing-related contests that have buy-ins ranging from a few dollars to several hundred dollars. On Friday, the contests featured races from most major tracks racing that day, including Santa Anita, Gulfstream, Aqueduct, and Tampa Bay Downs.

The Stronach Group filed its lawsuit last year amid outsized scrutiny of daily fantasy sites offering contests involving sports like football and baseball. The suit was widely viewed as a way for The Stronach Group to lodge its objections to DerbyWars’s business model in the event that the market for horse-racing fantasy sites expanded significantly.

Midland would not comment directly on the status of the lawsuit, but he said DerbyWars has told Stronach Group officials that it is not opposed to paying the company for the rights to its content.

“We made it very clear to The Stronach Group months ago that we are willing to contribute to their tracks,” Midland said.