Sports betting operator DraftKings is reportedly facing a class-action lawsuit filed in the Massachusetts Superior Court.
The lawsuit alleges that the company designed an “unfair and deceptive” promotional offer with the intention of misleading new customers, the Financial Times (FT) reported Friday (Dec. 8).
The lawsuit is backed by Richard Daynard, a lawyer who previously led litigation against the tobacco industry that led to a $260 billion settlement, according to the report.
The suit claims that DraftKings knowingly designed a $1,000 sign-up bonus to mislead new customers into joining the platform and maximizing their wagers, the report said. It argues that the company should have been aware that the promotion was deceptive to its target customers, who were new to sports betting and unlikely to understand the details of the offer.
The lawsuit alleges that DraftKings advertised the bonus through various channels, including social media, third-party platforms, TV and radio promotions, per the report.
In order to receive the full $1,000 bonus, 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 report. Additionally, the bonus would only be paid out in non-withdrawable credit.
The lawsuit argues that these requirements made it excessively expensive for customers to obtain the promised $1,000 bonus, and instead, statistically likely to lose money by chasing the bonus, the report said.
Lawyers for DraftKings, which operates the second most popular sports betting app in the United States, said in a letter from mid-November seen by the FT that the firm “respectfully disagrees with all of the claims and allegations,” per the report.
The company’s lawyers argued that one of the plaintiffs received exactly what was promised and that her claim of being deceived by the promotion was not credible, according to the report.
It is expected that DraftKings will push for the dismissal of the case, the report said.
DraftKings said in November that it expects online sports betting and iGaming in the United States to be a $30 billion total addressable market (TAM) in 2028, up from $20 billion this year.
If sports betting is legalized in additional states, the TAM will be even higher.