DraftKings is the target of a class action lawsuit in New York that accuses the sports betting giant of misleading customers with deceitful promotions and practices that put problem gamblers at risk.
Filed with the U.S. District Court for the Eastern District of New York, the lawsuit asserts that DraftKings has been “deceiving New Yorkers” with the objective of “misleading them” into wagering larger amounts of money on a more regular basis.
Plaintiffs Clara De Leon and Eric W. Mirsberger Jr. are claiming that the use of language such as “risk-free bet” or “no sweat bet” in promotions offered to new and existing customers falsely promises new customers that they can receive free money, which can be used to wager without risk.
The plaintiffs claim that the practice is likely to increase the amounts that customers will bet by refunding such promotional wagers with bonus bets rather than real cash money.
The suit asserts that DraftKings has designed the promotions in question as an incentive to “gambling-naive customers”, and that DraftKings does not clearly communicate the risks of losing money to new customers taking advantage of these “no sweat” promotions.
In addition, the plaintiffs argue that the application of these “risk-free bet” and “no sweat bet” promotions by DraftKings is designed to promote long-term gambling by new customers, whom they claim are forced to make multiple bets to comply with the terms of the promotions.
This is just the latest in a long line of legal troubles as a result of ambiguous advertising language.
New York Lawsuit Accuses DraftKings of Targeting Problem Gamblers
However, there is also an addition to the claims that the company’s “risk-free bet” and “no sweat bet” promotions are misleading to new customers.
The lawsuit also asserts that DraftKings takes steps to limit the size and frequency of bets placed by experienced sports bettors and that the company deliberately vulnerable customers with special treatment that can deepen an existing gambling addiction.
DraftKings is accused of targeting customers it knows are at-risk gamblers by pairing them with so-called VIP Hosts, whose job is to oversee and cultivate relationships with DraftKings’ most highly engaged customers.
The plaintiffs claim that the DraftKings VIP Hosts actively “milk them for every dollar they have” using predatory tactics and enticements such as promotions that require more deposits and wagers.
“As expected, some of these targeted people developed debilitating gambling addictions as a result of DraftKings’ carefully orchestrated schemes to draw them in with misrepresentations and then force them to engage in habit-forming behavior to meet the promotional terms as they chase after DraftKings’ illusory promises,” stated the suit.
These accusations assert that DraftKings has broken New York laws relating to false advertising, responsible gambling messaging, intention misrepresentation, fraudulent inducement, unjust enrichment and negligence.
The plaintiffs are seeking injunctive relief and compensatory damages.
DraftKings Facing More Legal Troubles
The New York lawsuit is just the latest in a series of legal troubles that have beset the Boston-based online sportsbook.
In addition to the latest claims, DraftKings is facing a class-action suit in Massachusetts regarding its promotion of “risk-free” bets.
This was launched last summer by two state residents, with the help of the Public Health Advocacy Institute. It claims that DraftKings is in violation of state consumer protection laws for the way it presented a $1,000 sign-up bonus.
The suit says that in order to maximize the bonus, customers must deposit $5,000 and wager $25,000 over the course of 90 days.
While DraftKings recorded an early victory by successfully having the case relocated from the Massachusetts Superior Court of Middlesex County to the state’s Business Litigation court, a subsequent bid to have the lawsuit dismissed failed in August.
Judge Debra A. Squires-Lee rejected DraftKings’ arguments that the plaintiffs had not adequately described the injury or loss they experienced from the deposit by stating “These allegations plausibly suggest that (the plaintiffs) were harmed because they bought into a service worth less than they believed based on the promotion.”
DraftKings is fighting lawsuits filed in Illinois, Kentucky and New Jersey that accuse the company of making “false promises and misrepresentations” regarding its “no-sweat” promotions.