The Tucson Sugar Skulls, a team participating in the Indoor Football League, have taken legal action against two high-profile law firms and several of their partners. The team accuses the defendants of legal malpractice and breach of fiduciary duty after a failed attempt to secure a sports betting license in Arizona.

The Team Sought an Arizona Betting License

The lawsuit, filed in Pima County Superior Court on October 30, names Heidi Staudenmaier and Snell & Wilmer LLP, along with Adam Berger and Duane Morris LLP, as defendants.  The Sugar Skulls argue that the attorneys prioritized their relationships with leading companies in the sports betting sector, such as Fanatics Betting and Gaming, over their obligations to the team.

According to a recent Next.io report, the Sugar Skulls entered into a partnership with Fanatics in 2023 to pursue one of the limited event wagering operator licenses available under Arizona’s Event Wagering Act. The deal would have significantly benefited the team, providing it with a guaranteed payment of $5 million upon approval, in addition to a share of Fanatics’ annual profits and marketing revenues.

However, the Arizona Department of Gaming (ADOG) denied the joint application in August 2023, citing that the team’s home venue did not meet the 10,000-seat minimum requirement for eligibility. The Sugar Skulls and Fanatics experienced a bitter fallout, and the team later alleged that their lawyers mishandled the appeal process and failed to disclose key conflicts of interest.

The Sugar Skulls Allege They Lost Dozens of Millions

The ongoing dispute centers around whether Fanatics’ application was correctly structured. The Sugar Skulls claim that they did not seek a retail betting license tied to a physical sportsbook, instead preferring to focus on online wagering. The team claims that their lawyers allowed Fanatics to pursue a broader retail and online application without the team’s consent, ultimately dooming the bid.

The Sugar Skulls note that the ADOG gave them informal indications that a new online-only proposal could succeed in the next licensing window. However, Fanatics exited the partnership before that could happen, aligning itself with a tribal gaming partner and later securing a state license in March 2024.

The Sugar Skulls’ previous effort to prevent Fanatics from reapplying was unsuccessful in court, as the judge ruled that Fanatics’ independent application was not a direct threat to the team’s business interests. The team now alleges that this lost opportunity cost them potential lost profits of $15 million over five years and as much as $50 million over a decade, while Fanatics emerged unscathed.