DraftKings Facing Suit Over Alleged Deceptive Marketing Practices

A class action lawsuit is currently ongoing in a Suffolk County, Massachusetts state court that could have a far-reaching impact on the methods through which online sports betting sites in the US market seek to attract new customers.

US online sports betting giant DraftKings is being accused of using deceptive marketing in violation of Massachusetts consumer protection laws to convince new players to sign up at the site.

At issue is a specific risk-free first bet that DraftKings was offering to new players. Plaintiffs argue that the terms and conditions attached to the so-called “risk-free” wager require that they deposit up to five times the amount of the risk-free bet and wager 25 times the amount to be able to clear the funds from the original wager for withdrawal.

The maximum amount for the risk-free bet was $1,000. To be able to meet the wagering requirements so that they can eventually withdraw any funds from that original bet, DraftKings customers would be required to make an initial deposit of $5,000 and then bet an additional $25,000 in a 90-day window after opening their new account.

Lawyers for DraftKings counter that the terms and conditions attached to the bet are clearly stated on the company’s web page in easily understandable language. Thus, they argue that no deception was involved with the promotion.

None of the allegations has been proven in court.

A prominent legal mind is heading this class action suit

At the helm of this class-action suit is Richard Daynard. He is the head of Northeastern University’s Public Health Advocacy Institute (PHAI) and its nonprofit law practice, the Center for Public Health Litigation. Two Massachusetts residents, Shane Harris and Melissa Scanlon, are named as plaintiffs in the suit.

It was Daynard, 81, who, in the 1980s, led the legal battle that eventually resulted in a $206 billion settlement against the big tobacco companies.

Daynard wants to put a stop to these bonus wagers with what he views as very draconian hidden wagering requirements.

“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 – to qualify for credits that could only be used for more gambling,” Daynard said in a statement. “We think this will be an easy case to prove.”

DraftKings sought to have the case thrown out of court

This suit has been ongoing for nearly two years. It was originally filed on December 12, 2023. In August 2024, lawyers for DraftKings sought unsuccessfully to have the case dismissed. The court ruled against that motion.

The Massachusetts Gaming Commission has already banned online sports betting sites from using the term “risk-free bet” in any promotional offers.

If this class action suit does succeed, the effect on how online sports betting sites promote their product could be significant. Promotional offers designed to convince new players to sign up at sites is a key method for building a customer base. Initial bet offers are a major component of any sign up package offered by a sports betting site.

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