DraftKings is facing a class action lawsuit in Massachusetts due to “unfair and deceptive” bonus offer practices.
DraftKings is facing a class action lawsuit in Massachusetts due to “unfair and deceptive” bonus offer practices.
The Public Health Advocacy Institute, a non-profit based at the Northeastern University law school, filed the suit on behalf of two Massachusetts plaintiffs.
The individuals opened DraftKings Sportsbook accounts in response to a $1,000 bonus sign-up promotion advertised by the operator.
The lawsuit highlights that the offer had several conditions attached that were not sufficiently communicated to the plaintiffs.
New customers would have been required to make an initial deposit of $5,000 and gamble $25,000 over a 90-day period to qualify for the bonus.
Additionally, bettors would be required to do so only on bets with a three-to-one odds against, meaning players were “statistically likely to lose money” while chasing the bonus.
If achieved, the bonus itself was only available in the form of non-refundable credit.
“DraftKings knew, or should have known, that its advertisement and promotion was deceptive to its target customers,” said the lawsuit.
Northeastern law professor Richard Daynard played a major role in drawing up the suit. Daynard is best known as the architect of the legal strategy that proved the legal liability of the tobacco industry.
In 1998, this ultimately led to the tobacco industry agreeing to a landmark $206bn legal settlement to treat smoking-related illnesses alongside efforts to curb youth smoking.
“Online gambling is creating a public health disaster with increasingly addictive products right before our eyes,” said Daynard.
“In fact, massive advertising using unfair and deceptive promotions to hook customers on an addictive product bears an uncanny similarity to what the cigarette companies used to get away with.”
How vulnerable is DraftKings to a class action?
The relative novelty of online sports betting, and the subsequent lack of prior case law, makes the outcome of the case uncertain.
Whether a class action will prove successful remains to be seen. It can be notoriously difficult in US class actions to prove that the plaintiffs represent a valid class, let alone to succeed on the merits of the case.
A DraftKings spokesperson told the Financial Times it disputed the allegations and takes responsible gaming seriously.
“Regrettably the institute ignored our multiple attempts to engage in an in-person dialogue to carefully examine their concerns and, instead, filed suit,” a DraftKings spokesperson told the FT. “DraftKings intends to vigorously defend this lawsuit.”
As of December 2023, DraftKings is the largest US online gambling operator by market share.