DraftKings Faces Class Action Lawsuit In Massachusetts Over Bonus Ads

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DraftKings is under fire because of alledgedly “unfair and deceptive” bonus bet advertising.

The Public Health Advocacy Institute (PHAI) announced a class-action lawsuit against DraftKings and its promotional strategy last week. The organization filed the suit in Massachusetts’s Middlesex Superior Court on behalf of two Massachusetts bettors, Shane Harris and Melissa Scanlon.

The complaint claims the operator misleads customers into believing they receive a $1,000 bonus after depositing money into an account.

“Shane and Melissa are typical of many thousands of people in Massachusetts who were misled by the bonus offer and would not have signed up had they understood DraftKings’ unfair and deceptive requirements,” PHAI Executive Director Mark Gottlieb said in a release.

Basis of DraftKings lawsuit

The DraftKings $1,000 bonus bet offer requires customers to deposit $5,000 into an account and wager $25,000 within 90 days. The complaint outlines a bettor would have to wager more than $276 per day for three months to qualify for the full bonus.

Customers also must use the bonus as wagers and cannot withdraw them as cash.

The complaint alleges, “DraftKings knew, or should have known, that its advertisement and promotion was deceptive to their target customers, who were new to sports betting and were extremely unlikely to understand the gambling lingo in the fine print.”

Plantiff famous for tobacco lawsuits

The PHAI is based at the Northeastern University School of Law in Boston. One of the organization’s leaders, Northeastern University Distinguished Professor of Law Richard Daynard, was part of a lawsuit against big tobacco for its health risks in the 1980s.

Now, Daynard claims DraftKings is aware its product is prone to addiction.

“Online gambling is creating a public health disaster with increasingly addictive products right before our eyes,” Daynard said in a release. “In fact, massive advertising using unfair and deceptive promotions to hook customers on an addictive product bears an uncanny similarity to what the cigarette companies used to get away with.”

DraftKings plans to fight lawsuit

DraftKings plans to “vigorously defend” itself against the allegations, according to a spokesperson.

“As a customer-first organization, DraftKings takes consumer protection and responsible gaming seriously,” DraftKings said in a statement to LSR. “Regrettably, the institute ignored our multiple attempts to engage in an in-person dialogue to carefully examine their concerns and, instead, filed suit.”

The offers were advertised through social media, TV and radio, and third-party platforms, according to PHAI.

Bonus bets not new

DraftKings has run the $1,000 bonus bet offer across its US sports betting footprint this year.

Sportsbooks use promotional offers to acquire new customers, particularly in new markets. Online Massachusetts sportsbooks launched in March.

Sportsbook advertising has increasingly been in the spotlight with legislators and regulators, including in Massachusetts. As multiple jurisdictions banned using the term “risk-free” with sportsbook offers, the American Gaming Association updated its Responsible Marketing Code to prohibit its use.