DraftKings faces legal scrutiny over alleged bonus deception in Massachusetts

US sports betting giant DraftKings finds itself on the brink of a potential class-action lawsuit in its home state of Massachusetts. The Northeastern University-based Public Health Advocacy Institute (PHAI) and the Center for Public Health Litigation announced on Friday their intent to pursue legal action over a purportedly misleading promotion related to a $1,000 bonus offered to new bettors in Massachusetts.

The crux of the legal challenge lies in the claim that DraftKings customers were not adequately informed about the conditions attached to the promised $1,000 bonus. The lawsuit contends that customers were required to make a deposit of $5,000 and place bets totaling $25,000 within a 90-day window to qualify for the bonus.

Moreover, these bets needed to be at odds of -300 or longer to participate in the promotion. And even if these criteria were met, the lawsuit alleges that bettors would only receive "non-withdrawable credits," not the actual bonus as advertised.

PHAI Executive Director Mark Gottlieb cited the experiences of two named plaintiffs, Shane Harris and Melissa Scanlon, as representative of a larger group of Massachusetts residents who, according to the lawsuit, were misled by DraftKings' unclear bonus terms.

The assertion is that these customers were unaware they would need to engage in an average daily betting activity exceeding $276 for three months to receive their sign-up gift and that they would not have signed up had they understood the terms.

Disagreeing with the claims and allegations made by PHAI, DraftKings expressed its intention to defend itself against the lawsuit. The company stated that it had attempted to engage in an in-person dialogue with PHAI to address concerns but was met with legal action instead. 

Massachusetts entered the online sports betting market in March of this year, permitting a select group of mobile operators to legally accept wagers in the state. However, the industry faced challenges and critiques related to marketing rules even before the launch, leading regulators and lawmakers to adjust marketing rules to ensure fair practices.

Richard Daynard, a law professor at Northeastern University and president of PHAI, who was previously involved in tobacco-related legal battles, draws similarities between the burgeoning legal scrutiny faced by online gambling platforms and Big Tobacco companies.

Daynard contends that DraftKings knowingly designed its promotion to maximize customer sign-ups, bets placed, and money spent, asserting that this is an unfair business practice given the addictive nature of gambling products.

“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 an unfair business practice for this reason as well,” the suit stated.

While the named plaintiffs are not alleging addiction injury, they are seeking economic damages, statutory damages, treble damages, injunctive relief, and any further relief deemed appropriate. Additionally, the lawsuit calls on DraftKings to cease similar promotions in the future.