The US law professor who masterminded the litigation strategy that led to a $206bn settlement from Big Tobacco is backing a class-action lawsuit against sports betting operator DraftKings over an "unfair and deceptive” promotional offer.
The lawsuit, filed in the Massachusetts Superior Court on Friday, alleged that the US company, which operates the second most popular sports betting app, "knowingly and unfairly designed” a $1,000 sign-up bonus with the aim of misleading new customers into joining the platform to "maximize” the money wagered. Two Massachusetts residents are plaintiffs in the class action.
The case is funded by the Public Health Advocacy Institute (PHAI), a Boston-based advocacy group chaired by Professor Richard Daynard, who spearheaded litigation against the tobacco industry in the 1980s. DraftKings’ Boston headquarters are located a mile from Northeastern University, where Daynard teaches.
The class action comes on the heels of a 2018 Supreme Court ruling liberalising the industry. Massachusetts legalised online sports betting this year, bringing the number of US states that have done so to 27. The market is expected to generate $8.5bn in gross revenues this year in the US, according to Eilers & Krejcik Gaming.
Daynard said that the nascent US online betting industry had faced little pushback since its inception. "There’s been a monologue from the industry,” he told the Financial Times. "We want to change that, we want to make it a dialogue.”
The lawsuit outlined how DraftKings advertised a bonus for first-time users of "up to $1,000” through a range of social media, third party, TV and radio promotions. But in order to ever receive $1,000 in additional bets, customers had to make a $5,000 initial deposit, risk $25,000 in real money within 90 days and bet on events with odds steeper than 1-3, according to the lawsuit. The bonus would also be paid out only in non-withdrawable credit.
DraftKings should have known its promotion "was deceptive to its target customers, who were customers new to sports betting and who were extremely unlikely to understand the details of the promotion”, the lawsuit alleged.
"In other words, the ‘$1,000 bonus’ is structured so that it is inordinately expensive to obtain $1,000, and the new user is, instead, statistically likely to lose money by chasing the bonus,” it added.
DraftKings was engaging in "a particularly unfair business practice because of the addictive nature of the underlying product”, according to the lawsuit, which is requesting the award of damages, including the promised $1,000 bonus.
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