Legal Actions Against DraftKings Laws & Regulations

Deceptive Promotions Lead to Legal Actions Against DraftKings

By Lisa Spencer Senior Editor Updated: 04 May 2024

Lisa Spencer Senior Editor

As a Senior Editor at Betting.US, Lisa Spencer is a valuable member of our expert team. With a Master’s degree in Applied Mathematics, Lisa is adept in gambling theory and analyzing odds. She contributes by writing online sportsbook reviews and finding competitive markets to help our readers make an informed choice.

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It has been revealed that the leading sportsbook operator, DraftKings, is facing legal turmoil following the filing of a class-action lawsuit that alleges deceptive practices in its promotional offers. Filed on April 18, 2024, in a New York federal court, the suit accuses DraftKings of misleading new customers by promising risk-free bets, only to subject their initial wagers to potential losses.

Samantha Guery, who is heading the legal action, is seeking unspecified damages on behalf of DraftKings’ New York-based clientele who are said to have fallen victim to the misrepresented promotion. Bloomberg reported that the lawsuit states many users, enticed by the appeal of risk-free bets, later discovered their funds were actually open to losses.

Ads Promising Free Bets to Clients

A key part of the controversy relates to advertisements that promised clients a ‘free bet’ in the event of a loss on their supposed ‘risk-free bet.’ However, the lawsuit alleges that this offer comes with a caveat, as users must reinvest their winnings from the free bet to access the full amount.

According to officials, this lack of clarity constitutes a breach of consumer protection laws, including Section 349 of the New York General Business Law, which prohibits deceptive practices by businesses.

It is also claimed that DraftKings’ promotional tactics have breached advertising regulations outlined in New York’s Racing, Pari-Mutuel Wagering and Breeding Law. The American Gaming Association also recently revised its Responsible Market Code to prohibit the use of ‘risk-free’ marketing strategies, further complicating DraftKings’ legal position. The lawsuit states:

DraftKings knowingly and unfairly designed its promotion to maximize the number of consumers that would sign up for its sports gambling platform, the number of bets that would be placed through the platform, and the amount of money that would be placed on bets through its platform.

However, the sportsbook operator said that it ‘respectfully disagrees’ with these allegations and that it will defend itself in the case.

Past Problems with Promotions

It was further noted that this is not the first time DraftKings has found itself caught up in legal disputes over promotional practices.

A similar lawsuit was filed in Massachusetts, where the company is headquartered, alleging false advertising of its online betting platform. According to reports, the lawsuit, which was filed by the Public Health Advocacy Institute and its affiliate Center for Public Health Litigation in December, accuses DraftKings of failing to disclose stringent requirements for receiving a registration bonus.

Among these requirements was the need for users to make a substantial deposit and wager a significant sum within a specified timeframe. Officials said that these conditions were not properly communicated to customers. This latest lawsuit adds to DraftKings’ growing list of legal challenges, highlighting the importance of greater transparency when it comes to sportsbook promotions.

Officials also claim that the outcome of these lawsuits could have huge implications for the company’s reputation and bottom line. With regulatory demands increasing as more and more states legalize sports betting, DraftKings faces increased scrutiny over its marketing practices and compliance with consumer protection laws.