DraftKings Sued in New York Over Misleading ‘Risk-Free’ Bet Promotions

DraftKings Accused of Deceptive ‘Risk-Free’ Bets in New York Class Action Lawsuit

DraftKings Under Legal Scrutiny for ‘Risk-Free’ Bets—DraftKings is facing a class action lawsuit in the Southern District of New York, challenging its marketing of “risk-free” bets as misleading. Filed on behalf of plaintiff Samantha Guery by Reese LLP, the lawsuit alleges that these promotions do not hold true to their claims, potentially entrapping consumers in risky betting practices contrary to the advertised assurances. This case highlights critical questions about the ethics and legality of promotional strategies in the online betting industry, particularly as they relate to consumer protection laws in New York.

Background of the Lawsuit

On April 17th, the legal challenge against DraftKings was initiated, citing deceptive marketing tactics that reportedly exploit consumer expectations and trust. The lawsuit focuses on the operator’s promotion of bets that are ostensibly “risk-free”—a claim that, according to the plaintiff, is fundamentally misleading because these bets actually involve considerable risk of financial loss.

The Nature of ‘Risk-Free’ Bets

According to the lawsuit, DraftKings advertises that if a consumer places a bet and loses, they will receive a free bet of equivalent value. However, the suit points out a critical catch: the free bets must be placed on further wagers before any winnings can be withdrawn, and they do not include the return of the original stake in the event of a win. Therefore, if the free bet is successful, the payout is less than it would be had the bet been placed with the user’s own cash, due to the absence of the initial stake in the payout calculation.

Legal Allegations and Implications

The class action argues that DraftKings’ promotions violate New York General Business Law Section 349, which prohibits deceptive acts and practices in business. Furthermore, it highlights non-compliance with advertising guidelines stipulated in the state’s Racing, Pari-Mutuel Wagering, and Breeding Law section 1363, designed to ensure fair advertising practices in gambling.

The Bigger Picture in Gambling Advertising

This lawsuit against DraftKings is part of a broader scrutiny of gambling advertising practices. The American Gaming Association (AGA) amended its Responsible Marketing Code in March 2023 to prohibit “risk-free” promotions, reflecting growing concerns about the potentially misleading nature of such offers. The case also draws parallels with previous actions led by public health advocates, including a December class action by the Public Health Advocacy Institute which targeted similar marketing practices by DraftKings.

Consumer Protection and Industry Response

The plaintiff seeks to have the court certify the lawsuit as a class action, which would allow other affected DraftKings customers to join the suit in seeking compensatory damages. This legal action underscores the ongoing tensions between aggressive marketing strategies in the gambling industry and the imperative to protect consumers from misleading practices.

Conclusion: A Test Case for Gambling Marketing Practices

The outcome of this lawsuit could have significant implications for how gambling promotions are structured and marketed in the United States. As regulatory frameworks continue to evolve, the gambling industry must balance innovative marketing strategies with stringent adherence to consumer protection laws. For consumers and stakeholders in the gambling sector, this case serves as a critical reminder of the need for vigilance and advocacy in promoting fair and transparent gambling practices.

Stay Informed and Engaged

For consumers, industry stakeholders, and regulators, staying informed about developments in this lawsuit is crucial. Understanding the intricacies of gambling law and consumer rights will be key to navigating and shaping the future landscape of gambling marketing and regulation. As the case unfolds, it will provide valuable insights into the legal responsibilities of gambling operators and the protections afforded to consumers under the law.