Class Action Lawsuit Against DraftKings

A lawsuit challenging the business practices of the online betting industry can proceed, a judge has ruled.

In December 2023, the Public Health Advocacy Institute (PHAI) and its Center for Public Health Litigation filed a class action lawsuit against DraftKings in Massachusetts Superior Court for an allegedly misleading gambling advertisement. 

The suit claims that DraftKings misinterpreted what was required for bettors to receive $1,000 in so-called “bonus bets” for creating an online gambling account.

In August 2024, a court in Boston denied DraftKings’ motion to dismiss the case. The lawsuit will proceed after Massachusetts Superior Court Judge Debra Squires-Lee deemed DraftKings’ motion unconvincing.

“This decision will allow the case to proceed to the discovery phase where we have the opportunity to depose those involved with the deceptive promotion and collect internal communications to gain insight into how it was developed and executed,” executive director of the PHAI at Northeastern University School of Law Mark Gottlieb said in a press release.

A Risky Promo

The advertisement, which ran on social media, television and radio, offered a $1,000 “bonus” to new gambling customers, which many customers took at face value.

However, the fine print said that to receive the bonus you’d need to make an initial deposit of $5,000 and wager a total of $25,000 in 90 days, which two bettors say was misleading. 

Bettors Shane Harris and Melissa Scanlon filed the suit with the Massachusetts-based PHAI.

After DraftKings Sportsbook launched in Massachusetts in 2023, Harris and Scanlon signed up for the sportsbook at separate points in the spring of 2023, each making initial deposits of undisclosed amounts. The suit states that they wouldn’t have made the initial deposits “if they understood the odds or costs of the promotion.”

DraftKings Has Early Loss in Court

DraftKings’ unsuccessful argument to have the case dismissed was based on three arguments:

• The case did not allege a “distinct” injury, which would be required for the plaintiffs to seek redress from the operator under Massachusetts law.

• The promotion allegedly accurately described the nature of the promotions.

• Harris should be dismissed as a named plaintiff because he did not send a pre-suit demand letter to the business.

Per a report from Next.Io, Judge Squires-Lee said many of the plaintiffs’ claims were conclusory but eventually concluded the allegations “plausibly suggest” they were harmed because they bought into a service worth less than what they believed based on the promotion.

Betting Industry Like Big Tobacco?

Harris and Scanlon’s case is aided by Richard Daynard, who serves as the Institute’s president and Northeastern University Distinguished Professor of Law. Daynard developed a legal strategy against Big Tobacco, which led to a historic $206 billion settlement in 1998.

“This bogus promotion, designed to lure customers into an addictive trap, required new users to risk large amounts of money and gamble hundreds of dollars each and every day in order to qualify for credits that could only be used for more gambling. We think this will be an easy case to prove,” Daynard said in a press release.

According to betting addiction statistics, 30-40% of online bettings experience problems.

The suit accused DraftKings of “knowingly and unfairly” designing its so-called bonus to maximize sign-ups and requiring a deposit of a significant amount of money to receive the promotion. Inducing players to deposit that much money can cause harm.

The case’s next hearing is scheduled for Dec. 10.

The denial of the motion to dismiss adds to what’s been a tough 2024 for DraftKings, a top player in the American sports betting market that was worth $10.9 billion in 2023. 

At the beginning of August, DraftKings announced it planned to implement a new “surcharge” on customers in a group of states with higher taxes on the betting industry. DraftKings rescinded the surcharge after criticism on social media.

The sportsbook has also faced scrutiny over a risky partnership with LeBron James.

Image via Pixabay.