Class action plaintiffs gamble on a big payoff in court, arguing that the online sportsbook’s promotions are at odds with Illinois, Kentucky, and New Jersey law.
CHICAGO – Since a 2018 decision by the United States Supreme Court paved the way for legalized sports betting, American consumers have lost billions of dollars to online sportsbooks. The industry targets novice gamblers with relentless advertising campaigns promising free money bets and no-risk gambling. Because the vast majority of online gamblers lose money, and many lose far more than they can afford, the industry must constantly attract fresh blood as their customers wash out. Like other industries peddling addictive and dangerous drugs, it’s a business model that relies on hooking a steady stream of new young customers and influencing them to act against their best interests.
This ugly reality of the online gambling industry, a new series of lawsuits argues, is what drives sportsbook giant DraftKings to lure new customers with promotional gimmicks that rely on “deception, fraud, false promises, and misrepresentations.” The class action suits, filed today in Illinois, Kentucky, and New Jersey by six individual plaintiffs, and on behalf of many others, ask for injunctive relief and damages related to DraftKings widespread and ongoing deception of its customers.
“There’s a reason sports betting used to be illegal,” says Isaac Green, an attorney with the law firm of Loevy + Loevy, which represents the plaintiffs. “Consumers should be able to rely on one of the leading sports gambling outfits in the country to do what it promises and play by the rules. Our complaints allege that DraftKings is misleading and manipulating customers in violation of the law.”
At the core of the lawsuits are specific DraftKings promotions that the complaints allege are deceptive and hide features that are designed to inculcate problem gambling habits in new users. One of these promotional practices is DraftKings’ so-called “Risk-Free Bets,” later rebranded “No-Sweat Bets.” Under either name, the lawsuits argue, the promotion leads new customers to believe they can place a bet without risking losing their money. Under the actual, small-print and confusingly worded terms, however, customers funds remain at risk and their losses are not compensated at par.
“The complaints allege that DraftKings deliberately makes it sound like you get the cash value of your bet back, which encourages new players to bet larger amounts of money than they otherwise would,” says Green. “But you don’t. It’s not ‘risk-free’ as advertised; instead, the complaints allege that DraftKings is just training customers to chase their losses, giving them expiring ‘bonus’ bets with less favorable terms than their original bets.”
The complaints document a number of other ways in which the game is unfairly and illegally rigged in DraftKings’ favor. For example, bad gamblers are encouraged to bet big, boldly, and often, but anyone showing an expertise and a propensity for winning will quickly find the size and frequency of their bets limited. The company is not interested in bookmaking for seasoned gamblers: it just wants “marks,” according to the lawsuit.
Another example cited in today’s complaints is the company’s widely publicized deposit match offers. Once again, the complaints allege that these promotions incentivize a larger deposit than a customer might otherwise be inclined to make, but the devil is in the details: in order to receive the match customers have to deposit up to five-times the matching amount, and then bet up to thirty times that amount on “long shots,” all in a brief period of time. Even then, if they happen to win, the players often don’t receive actual cash, just worthless virtual tokens called “DK Dollars” that must be wagered and won again before they have any value.
“The complaint highlights DraftKings’ ubiquitous promotional advertising, promising in large print an ‘all-upside’ gambling experience,” say Green. “But, as we allege, it’s easy to miss the small print that obscures the truth: once you give them your money, it’s all downside.”
The suit also charges that DraftKings—much like the tobacco industry before it—starts targeting its consumers before they are legally allowed to participate. “DraftKings’ targeted marketing often reaches young people, particularly young men, who are not yet old enough to legally gamble,” the complaints say, citing in particular the popularity of DraftKings’ daily fantasy sports contests—where users who are under twenty-one years old can win prizes without putting down money.
Mike Kanovitz, the partner leading the litigation, summarizes:
“Sports betting apps are the tobacco industry of this decade: harmful, deceptively marketed, and too easily accessible to young people. Rather than acting responsibly to address these problems, DraftKings is taking full advantage of them to pad its bottom line. Its so-called ‘risk-free’ bets and deposit match promotions are a fraud designed to lure inexperienced and susceptible consumers with an illusion that their money is safe. It is not. Most people who fall prey to the ads never see their money back, and far too many chase their losses and suffer tragic results. DraftKings knows this up front and is making its business out of that suffering. This is a national problem and we are bringing litigation to address it.”
Plaintiffs are represented by Michael Kanovitz, Jon Loevy, Isaac Green, and Aaron Tucek of the law firm of Loevy + Loevy and the New Jersey Plaintiff is also represented by Elvin Esteves of the Law Offices of Elvin Esteves LLC. Their lawsuits charge DraftKings with violating several state laws, including the Illinois Consumer Fraud and Deceptive Business Practices Act, the New Jersey Consumer Fraud Act, and the Kentucky Consumer Protection Act. The Illinois lawsuit also seeks a declaration that DraftKings is not complying with Apple’s and Google’s rules for mobile app developers.
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Copies of the complaints can be found here, here, and here.
Loevy & Loevy is one of the nation’s largest civil rights law firms, and over the past decade has won more multi-million-dollar jury verdicts than any other civil rights law firm in the country. For more information, go to www.loevy.com
