DraftKings Faces Class Action Lawsuit Over Promotional Practices in Massachusetts
- DraftKings loses motion to dismiss a class action consumer lawsuit.
- The court's decision puts DraftKings' practices under further scrutiny.
- The company could face substantial financial liability.
In a significant legal development, DraftKings is facing a class action lawsuit initiated by two customers, represented by a public health advocacy group, alleging violations of Massachusetts consumer protection and false advertising laws. The lawsuit centers on a promotional offer that promised new customers a “$1,000 Deposit Bonus” for opening an account. The Superior Court of Massachusetts recently denied DraftKings’ motion to dismiss the case, allowing for further examination of the company's promotional practices, which could lead to substantial financial repercussions. Massachusetts has been grappling with concerns over gambling addiction, prompting the implementation of strict regulations under its Sports Betting Law. This legislation mandates operators to submit annual problem gambling plans, prohibits credit lines and credit card usage for betting, and establishes a Sports Wagering Fund to support youth programs. Additionally, the Massachusetts Gaming Commission is tasked with researching the social and economic impacts of sports wagering, aiming to provide scientifically-based recommendations. Despite the legal challenges, the market for sports betting in Massachusetts has proven lucrative, with the state collecting an average of over $10 million monthly in taxes since the legalization of sports betting in March 2023. However, a report from the Gaming Commission revealed that 31% of gamblers in the state could be classified as problem gamblers, highlighting the potential risks associated with the burgeoning industry. The plaintiffs argue that the promotional offer's requirements compel customers to gamble excessively, with claims that they would need to wager over $276 daily for three months to qualify for the bonus. As the case moves into the discovery phase, DraftKings will be required to provide documentation related to its advertising practices, which could further illuminate the implications of its promotional strategies.