Public Health Advocacy Group Sues DraftKings
WOBURN, Mass. — DraftKings, one of the nation’s most popular sports betting companies, engages in unfair and deceptive practices while taking advantage of the addictive nature of gambling activities, a class action lawsuit filed in Massachusetts claims.
The lawsuit, Scanlon et al. v. DraftKings, was filed in the Middlesex Superior Court in Massachusetts on Dec. 8 by the Public Health Advocacy Institute, a public interest law firm known mainly for its work in the realms of tobacco and gun violence.
The institute, which is based at the Northeastern University School of Law in Boston, said it filed the class action on behalf of Massachusetts residents who opened DraftKings Sportsbook accounts in response to a widely advertised $1,000 bonus sign-up promotion.
The lawsuit alleges that members of the class were not aware that, in order to qualify for the sign-up bonus of $1,000, new customers were required to make an initial deposit of $5,000.
After that, they had to gamble $25,000 on certain qualifying bets over a finite time period. If they did all of that, they would qualify to receive non-withdrawable credits to use on the platform, the lawsuit says.
The lawsuit focuses specifically on the experiences of individual plaintiffs Shane Harris and Melissa Scanlon, who responded to the offer and later said they were confused as to why they never received the $1,000 sign-up bonus.
The institute’s executive director, Mark Gottlieb, said in a written statement that “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.”
Massachusetts is one of 38 states that has approved sports betting in the past five years since the U.S. Supreme Court cleared the way for them to do so with its May 2018 decision in Murphy v. National Collegiate Athletic Association.
Originally filed as Christie v. National Collegiate Athletic Association (control of the statehouse changed over the course of the litigation) and combined with a separate case, NJ Thoroughbred Horsemen v. NCAA, the question before the justices was whether the Professional and Amateur Sports Protection Act passed by Congress in 1992 was constitutional.
The act effectively outlawed sports betting nationwide, barring states from sponsoring, operating, advertising, promoting or licensing any form of sports gambling.
The law made exemptions for gambling in four states — Nevada, Delaware, Oregon and Montana — which already had legal sports gambling regulations in place.
Gov. Chris Christie wanted New Jersey to apply for a similar exemption, but the state failed to do so before the exemption window closed. Ultimately, believing New Jersey was losing out on tens of millions of dollars of annual revenue, the governor sued to challenge the law.
Those who wanted to pump the brakes on sports betting argued the supremacy clause of the Constitution should take precedence and if it did, the act could stay in place.
The pro-betting side countered by arguing that in passing the law, Congress was commandeering power from the states, infringing on state authority to regulate issues as laid out in the Constitution.
In the end, a majority of justices sided with the pro-betting side, holding that the law was unconstitutional.
In short order, a number of states, including New Jersey, established legalized sports gambling, and particularly, wagering on fantasy sports, defining this level of betting as a game of skill rather than actual gambling.
In no time, DraftKings and FanDuel became the two largest companies in the daily fantasy sports space.
DraftKings allows users to enter daily and weekly fantasy sports-related contests and win money based on individual player performances in five major American sports — MLB, NHL, NFL, NBA and PGA.
It did the same for the United Kingdom’s Premier League and UEFA Champions League football, NASCAR auto racing, Canadian Football League, the XFL, mixed martial arts, boxing, tennis, All Elite Wrestling and WWE.
According to the complaint, “DraftKings’ advertising of the bonus is … unfair and deceptive because an eligible consumer who, by definition, is a new participant in Massachusetts sports betting, like the plaintiffs, would be unlikely to understand the cost and risk involved in qualifying for the $1,000 bonus.
“In fact,” the complaint continues, “if the plaintiffs had understood the cost or the odds of winning the bonus, they would not have acted upon the promotion.”
To win the bonus, the complaint says, DraftKings requires participants to satisfy three “significant” requirements “explained only in [an] unreadable font size.”
Those requirements are that they would have to deposit $5,000 up front, they would have to bet $25,000 within 90 days, and that the $25,000 in bets would have to be placed in situations with odds of “300 or longer.”
“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 platforms,” the complaint says. “This is a particularly unfair business practice because of the addictive nature of the underlying product offered by [the] defendant.
“Gambling products are not typical consumer products,” the complaint continues. “They are addictive. Both the [current] edition of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders and the World Health Organization treat addiction to gambling in the same diagnostic category as addiction to heroin, cocaine and tobacco.
“Marketers of a known addictive product should take special precautions to minimize addiction risk, not require $25,000 of gambling to qualify for a promotional offer to new customers who are likely to be gambling-naive. DraftKings’ promotion is an unfair business practice for this reason as well,” the court filing says.
“While plaintiffs are not alleging herein an addiction injury, plaintiffs seek economic damages, statutory damages, treble damages, injunctive relief and such other and further relief as may be available to them under … Massachusetts law, including orders that DraftKings cease this promotion and substantially similar promotional advertising which are continuing at the time of this filing.”
“The time has come to bring public health reform and regulation to the gambling industry because lives are in the balance,” said Harry Levant, the institute’s gambling advisor, in a written statement.
Levant is a doctoral student in Law and Public Policy at Northeastern who studies the public health impact of online gambling.
Northeastern University distinguished professor of Law, Richard Daynard, who is also president of the institute, went a step further in calling out DraftKings and similar companies.
“Online gambling is creating a public health disaster with increasingly addictive products right before our eyes,” Daynard said in a written statement.
“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,” he said.
The Well News has reached out to DraftKings for comment.