DraftKings Faces Class Action Lawsuit in Massachusetts Over “Deceptive” Promotional Offer
DraftKings Sportsbook has been named in a proposed class action lawsuit filed this week in Massachusetts. The lawsuit — submitted in the Middlesex Superior Court of Massachusetts — alleges that DraftKings used deceptive marketing tactics to entice customers to sign up for the sportsbook.
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Public Health Advocacy Institute Files Class Action Against DraftKings
The organization behind this class action is none other than the Public Health Advocacy Institute, the same organization responsible for prosecuting big tobacco. In its two-count lawsuit, PHAI alleges that DraftKings uses “unfair or deceptive practices” and “misleading advertising” schemes to market its Massachusetts sports betting product.
A recent sign-up promotion from DraftKings Sportsbook in Massachusetts suggests that new bettors can claim a “$1,000 Bonus” when they register for a new account at the online sportsbook.
According to the suit, the sportsbook advertised:
“Join DraftKings Sportsbook. New Customers Get a $1,000 Deposit Bonus in DK Dollars!”
The claim asserts that, in actuality, new bettors are only eligible to receive $1,000 in bonus bets by depositing $5,000 and wagering $25,000 within 90 days. According to the fine print, these $25,000 in wagers can only be placed on bets with -300 odds or longer.
By clicking through a “view terms” hyperlink in the fine print below the ad, customers could then access the particulars of the promotion.
The suit reads:
“A new consumer could not reasonably have been expected to understand from the face of DraftKings’ advertisements that the $1,000 bonus would not be provided at the time of their initial deposit, but that instead he or she would earn the bonus only $1 at a time for every $25 wagered. Thus, to receive the bonus, the new customer would have to gamble and risk $25,000 within 90 days.”
PHAI, The Brand Behind The Suit
Richard Daynard, the Northeastern University law professor behind this class-action lawsuit, was one of the leading attorneys to help expose big tobacco in the 1980s, revealing that tobacco brands were fully aware that their products carried substantial cancer risks. His efforts served as the catalyst for a monumental shift in the tobacco industry, forever changing the way tobacco is advertised.
According to Daynard, DraftKings’ deceptive advertising is even more concerning because the operator is aware that its product carries inherent risks and exposes customers to addiction.
PHAI noted:
“Gambling products are not typical consumer products. They are addictive. Marketers of a known addictive product should take special precautions to minimize addiction risk, not require $25,000 of gambling to qualify for a promotional offer to new customers who are likely to be gambling-naive. DraftKings’ promotion is also an unfair business practice for this reason.”
Along with the initial $1,000 bonus, the suit seeks judgment in the form of compensation for actual damages, reasonable costs, attorneys’ fees, and further relief.
DraftKings Denies Deceptive Advertising Allegations
DraftKings’ legal representation released a response to the lawsuit, saying that PHAI’s allegations are entirely unwarranted.
DraftKings also defended its position in an official statement, saying:
“As a customer-first organization, DraftKings takes consumer protection and responsible gaming seriously. DraftKings respectfully disagrees with the claims and allegations made by the Public Health Advocacy Institute.”
Additionally, DraftKings says it attempted to resolve the issue with PHAI outside of court without success:
“Regrettably, the Institute ignored our multiple attempts to engage in an in-person dialogue to carefully examine their concerns and, instead, filed suit. DraftKings intends to vigorously defend this lawsuit.”
Responsible Gambling At DraftKings
DraftKings has traditionally been ahead of the curve when it comes to responsible gambling and customer protection. It goes above and beyond in the way of Know Your Customer efforts, for instance, patrolling for underage betting and proxy wagering by comparing the network information of each new and registered user’s device.
Recent dialogue with the Massachusetts Gaming Commission, however, revealed that only 0.1% of DraftKings customers consistently implement time limits when using the sportsbook. A slightly higher 0.13% set spending limits, while 0.4% set betting limits and 2.3% implemented deposit limits.
MGC Chair Cathy Judd-Stein urged DraftKings to take immediate action to enhance players’ interaction with such responsible gambling tools. Jake List, Senior Director of Regulatory Operations at DraftKings, countered by reminding the MGC that, in actuality, these small percentages still accounted for thousands of customers.
Massachusetts Offers Minimal Sports Betting Ad Rules
Sign-up incentives are a dime a dozen in the sports betting industry. And in such a dog-eat-dog business, sportsbooks are willing to go the extra mile to offer promotions that set them apart from the crowd.
Since there are no federal regulations pertaining to sportsbook advertising US, states are left to implement their own advertising regulations as they see fit. Massachusetts — which launched retail sports betting on Jan. 31 and online sports betting on March 10 of this year — has already prohibited sportsbooks from using certain verbiage in promotions.
Further advertising regulations have yet to be implemented, however.
Massachusetts Responsible Gambling Efforts
The Public Health Trust Fund — a Massachusetts organization established to help curb problem gambling harm — sees roughly $24 million in annual tax revenue from Massachusetts sports betting and casino gambling. However, there’s been recent disagreement over how that money is utilized.
While the fund focuses heavily on problem gambling prevention, some believe it has failed to allocate adequate resources for treatment. According to records obtained from the Office of Problem Gambling Services, $7.8 million went to prevention-related initiatives in FY2023, while only $1.9 million was spent on treatment support services.
The non-profit Massachusetts Council on Gaming and Health has been vocal about this need for increased focus on treatment rather than prevention. Council CEO Marlene Warner said in a recent interview:
“When I think about the fact that we don’t have that many treatment centers — they’re outpatient and you may have to drive a long distance — forget about it. You’ve lost them.”
A recently approved independent research study, spearheaded by Sen. John Keenan, hopes to offer insight into the issue by providing concrete data on the scope of potential harms involved with gambling.
Keenan expects to discuss the study with the MGC and the MA Department of Public Health in the coming weeks and hopes to expedite progress on the project. From there, perhaps Massachusetts can implement an effective game plan for both gambling addiction prevention and treatment — one that irons out the specific do’s and don’ts of sportsbook advertising.
Until then, DraftKings remains in the crosshairs as sports betting’s sacrificial lamb in their home state of Massachusetts.
