If you were around for the rise and fall (well, maybe we will call it the transition) of daily fantasy sports, you undoubtedly remember that following the wave of excitement and the wave of advertising, there was a third wave of lawsuits. A new wave could be in store for sports betting advertising.
In the daily fantasy sports world, there were all kinds of lawsuits, ranging from the New York attorney general to various lawsuits from consumers. There were so many lawsuits and financial pressures that at one point, it was reported that DraftKings and FanDuel considered merging. What a different world that would be.
Well, I am sure that things are totally different this time. But following lots of concerns about the scope and language used in sports betting advertising, including the introduction of federal legislation, there is now a lawsuit in federal court. It is filed against Caesars, arguing amongst other things that their “free bet” promotions violated New York’s advertising laws and that the advertisements misrepresented what was being offered.
New lawsuit, aging story
While sports betting advertising has been in the eye of the storm for some time now, a new lawsuit was filed toward the end of February in the federal court for the Eastern District of New York. The lawsuit filed by Lachae Vickers, on behalf of herself and all others similarly situated (meaning they are seeking for this to be a class action lawsuit.)
The suit argues that Caesars Entertainment’s advertisements of “free” and “risk-free bet” or bets “on Caesars” were not “in any respect ‘free’ or without risk.” The complaint goes on to argue that:
Those advertisements contain materially deceptive representations while omitting any warnings regarding the acute and immediate risk that an initial bet is not without risk and not, in fact, “free.”
The complaint also alleges that the plaintiff and class members have been injured because they signed up for sports betting accounts that advertised free bets or risk-free bets; however, they actually had to spend money. It argues that the plaintiff class of bettors should not be responsible for their monetary losses because they signed up for accounts on the basis that they were going to make “free” or “risk-free” bets.
Industry practice in sports betting advertising?
The complaint highlights that Caesars was hardly alone in the use of the terms “free” or “risk-free.” In fact, the complaint notes that many of the company’s key competitors used very similarly worded promotions:
Several years ago, many online sportsbooks truly did provide risk-free bets or otherwise provide no-strings-attached free cash to lure new users, for example by providing straightforward deposit matches when new users signed up. Starting in 2020, however, “risk-free” offers became more common among some online sportsbooks, after an initial wave of generous deposit bonuses contributed to steep losses for many operators.
It argues that these promotional offers are eye-catching and difficult to turn down. The legal filing further cites various statements including those from the Executive Director of the Ohio Casino Control Commission who has expressed concerns about the terms.
The crux of the argument comes down to the process of acquiring the “free” money, or “risk-free” bet. For example, if there is a $1,000 risk-free wager, the bettor needs to deposit $1,000. Then, if the bet is unsuccessful, they are given site credit, which cannot itself be withdrawn and has a relatively short window to be used.
The plaintiff’s experience
According to the complaint, the named plaintiff signed up for a Caesars account “on the basis of Caesars’ promise that her first bet would be ‘risk-free.’” The plaintiff wagered and lost $125, and she was not reimbursed with cash; instead, she received site credit that had to be used within two weeks.
What are the lawsuit claims?
The complaint lays out five separate causes of action.
- The first is a violation of a provision of the New York General Business Law that prohibits deceptive advertising.
- The second and third causes argue negligent and intentional misrepresentation, respectively. These claims argue that the defendant knew that the plaintiff or potential plaintiffs would rely on the terms “free” and “risk-free” to sign up for accounts and the defendant knew the wagers did not in fact meet the definitions of those terms.
- The fourth cause of action alleged is fraudulent inducement, which argues that the defendant “misrepresented multiple material facts about its promotional offers,” in order to get individuals to open sports wagering accounts and make deposits.
- The final cause of action argues that the defendant has been unjustly enriched and that they should be required to pay restitution to the plaintiff and class.
Where does sports betting advertising case go from here?
There are likely to be several months of procedural maneuvering. Ultimately, the likelihood that this case ever goes to trial seems low.
None of the daily fantasy sports consumer protection cases ever went to trial (as far as I am aware), and some other ending to this case seems much more likely. It also seems likely that this will not be the last lawsuit of this sort.
As the complaint shows, Caesars was far from the only company using the language that the complaint argues was offending, which could mean that other lawsuits against other operators are still to come – time will tell.
The immediate lesson, however, has to be that the industry needs to move away from the problematic language in advertising because if they do not, they are going to end up being saddled with Rep. Paul Tonko‘s legislation or a neverending stack of legal bills.