DraftKings Sued Over ‘Risk-Free’ Bets
Similar Lawsuit Already Filed in Massachusetts
It’s been a busy week in court for DraftKings. On the same day a hearing involving former employee Michael Hermalyn was held, Reese LLP filed a class-action lawsuit against DraftKings. Reese LLP is representing Samantha Guerry in the matter. It’s not the first time to see DraftKings sued over ‘risk-free’ bets.
A somewhat similar case was filed in Massachusetts in December. Both cases accused the sportsbook of using deceptive language in their various sign-up bonus offers.
The New York case focused on the use of the term “risk-free,” and how they weren’t actually free. Northeastern University law professor Richard Daynard drafted the case.
“The promotion required that the customer place a bet with their own money,” the lawsuit read. “If a customer lost their bet, they were not returned to their original position. Instead, their accounts were credited with a “Free Bet” that was worth less than its counterpart in U.S. dollars implied by the promotional materials.”
The lawsuit broke down how the plaintiff concluded the bet wasn’t “risk-free.”
“Free Bets cannot be withdrawn and must be wagered to be converted to U.S. dollars,” the lawsuit read. “Furthermore, wagers made with Free Bets are not paid out like wagers made with U.S. dollars.
A $100 winning bet made with U.S. dollars at even odds recovers the $100 stake plus the $100 winnings less the sportsbook’s cut (known as the “vig” or “rake”) of 9%, which results in a payment of approximately $191.
By contrast, a winning bet made with a $100 Free Bet converts only to $100 US dollars less vig, which results in a payment of approximately $91.”
‘Risk-Free’ Language Banned in Other States
The lawsuit mentions that “risk-free” is banned in Ohio and Massachusetts. It claims DraftKings violated New York General Business Law Section 349, which is about deceptive business practices.
The suit also said DraftKings was not in compliance with New York law requiring gambling operators to comply with the advertising guidelines within New York’s Racing, Pari-Mutuel Wagering, and Breeding Law section 1363.
The American Gaming Association banned the use of “risk-free” in advertising by its members in March 2023. It wants bettors to be able to partake in gambling games without the appearance of deceptive advertising.
The lawsuit asked the court to rule all affected customers as a “class.” That allows the matter to be heard as a class action lawsuit.
Massachusetts Case Concentrates on Sign-Up Bonuses
The case in Massachusetts is a little different than DraftKings being sued over the ‘risk-free’ bets case in New York. In Massachusetts, the case is about the $1,000 sign-up bonus advertised by DraftKings. It states that customers weren’t made aware they needed to deposit $5,000 and wager $25,000 in 90 days to get the full bonus.
That works out to $276 a day for people to wager their best bets today. However, the wagers had to be at odds of -300 or greater. That makes it especially tough to come out ahead. It isn’t a matter of just playing your favorite picks and parlays each day. Those wagers had to be at steep odds.
The case was moved to the state’s Business Litigation Session of the Superior Court. That court uses two judge pairings to hear business disputes. A case like DraftKings sued over ‘risk-free’ bets is one the court would typically hear.
“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,” the Massachusetts lawsuit reads.
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