DraftKings Targeted in New Lawsuit Over “Risk-Free” Bets

Article by : Erik Gibbs Apr 21, 2024

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DraftKings, a major player in the online sports betting industry, is embroiled in legal trouble. It’s facing a new lawsuit over its promotion of “risk-free” bets in New York.

The lawsuit, initiated by Samantha Guery and spearheaded by Reese LLP with the assistance of law professor Richard Daynard from Northeastern University, alleges deceptive advertising on the part of DraftKings.

At the heart of the legal action is DraftKings’ promotion of “risk-free” bets, which the plaintiffs argue is misleading. The promotion required players to initially wager their own money, promising a refund in the form of a free bet if the original wager resulted in a loss.

However, plaintiffs contend that these free bets offered by DraftKings lacked true value since they could not be withdrawn before being wagered.

Moreover, the lawsuit asserts that the free bets provided by DraftKings would ultimately yield less profit, if successful, compared to bets placed with customers’ own cash. This allegation strikes at the core of DraftKings’ marketing strategy, questioning the legitimacy of its promotional offers.

The legal complaint cites violations of both Section 349 of the New York General Business Law, which prohibits deceptive marketing practices, and Section 1363 of the Racing, Pari-Mutuel Wagering and Breeding Law.

These allegations underscore the seriousness of the accusations leveled against DraftKings, highlighting potential legal consequences if the company is found guilty.

Interestingly, the timing of this lawsuit coincides with the American Gaming Association’s decision to ban “risk-free” promotions in March 2023, citing concerns over problem gambling. This broader industry shift points to growing scrutiny and regulation surrounding promotional practices within the sports betting sector.

In a related development, ESPN sports journalist Rece Davis recently ignited controversy by using the term “risk-free investment” in reference to sports betting. The incident was used as an example of the need for clarity and responsibility in the language used to describe betting activities, especially considering the potential impact on consumers.

As the legal process progresses, DraftKings is confronted with serious allegations challenging its promotional approach. The lawsuit’s resolution may significantly impact not just DraftKings, but also the wider realm of online sports betting in New York and beyond.