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A lawsuit challenging a common practice in online gambling advertising will move forward after DraftKings’ attempt to dismiss the complaint failed. Whether the litigation will produce any substantial change in how gaming licensees like DraftKings conduct marketing activities remains to be determined, though.
Even if the matter does actually go to trial, it might only have implications for one state in which DraftKings operates. The case has drawn the involvement of a notable legal expert.
Massachusetts court denies DraftKings’ dismissal motion
This complaint, Melissa Scanlon and Shane Harris v. DraftKings, was filed in the Middlesex Superior Court of the Commonwealth of Massachusetts on Dec. 8, 2023. The claimants asked the court to not only take action against DraftKings but to certify a class of Massachusetts citizens “who opened an account and deposited funds with DraftKings” during a promotional period.
DraftKings shortly thereafter asked the court to dismiss the complaint, but on Aug. 22, that motion was denied1 by the court. The case will move onto the discovery phase, which could prompt settlement discussions.
At the center of the dispute is DraftKings’ advertisement of a new customer bonus for its online sportsbook in Massachusetts. The onus of the arguments before the court will hinge upon where consumers’ responsibility to educate themselves begins.
Legal allegations focus on registration promo
The lawsuit accuses DraftKings of violating the Massachusetts Consumer Protection Act among other statutes. The allegations explicitly state that “the offer of the $1,000 bonus was and is unfair and deceptive because, among other things, a new customer would, in order to get a $1,000 bonus, actually need to deposit five times that amount, and then, within 90 days, place $25,000 in bets with only certain odds of return.”
DraftKings might argue that these conditions were clearly laid out in the offer’s terms, which is factual. From that narrow view, it will be hard to find DraftKings liable for consumers’ failure to read the conditions or failure to comprehend them.
However, the named statute involves more than simply making terms of an offer publicly available. There is a premise of fundamental fairness which the law addresses as well, where the situation becomes more subjective.
Liability might lie in offer’s structure, not advertising language
If this case does go to trial, the real question might be more whether DraftKings willfully structured this promotion so it was unnecessarily difficult to take advantage of than whether DraftKings made the terms of its offer clear to consumers in its marketing materials. Although discovery materials like internal communications from DraftKings might prove useful in making such a case, to what extent the claimants will get access to that information is in doubt currently.
The judge presiding over the case will determine that point of contention. That will likely be the biggest point of contention at the next hearing on Dec. 10, 2024.
Barring DraftKings writing a check to make this matter disappear, counsel for the claimants will probably try to convince the court that DraftKings intentionally misled consumers about their chances to realize the full value of the offer. DraftKings’ representation might levy a counterargument that it was transparent in its offer and it is under no legal obligation to make the full value of its promotion easy to realize. A ruling for the claimants could alter how DraftKings advertises in Massachusetts.
Whether that would have a significant impact on DraftKings’ operations in other US jurisdictions, or for other online gaming companies, depends on many factors. There is a signal that an interested party might want to escalate the matter.
Professor’s involvement might point to loftier ambitions
According to Maxwell Strachan of Vice, Northeastern University law professor Richard Daynard is involved2 in crafting the legal strategy for the claimants in this case. Daynard has some experience in doing this.
Daynard was instrumental in crafting the successful legal campaign against tobacco companies that led to an historic $206 billion settlement3 and other new regulations on tobacco in the US. Whether he will get a chance to replicate that success in the gaming arena is uncertain.
A victory for the claimants in Massachusetts state courts might embolden the organization that Daynard serves as president of, the Public Health Advocacy Institute, to pursue a similar case in federal court. The implications of a successful venture there could span beyond the borders of Massachusetts and inspire gaming licensees to voluntarily modify their practices.
For the time being, though, the matters at hand are the extent of discovery in the Middlesex Superior Court and any ongoing settlement discussions. If significant changes do come to the US online gaming industry someday, this lawsuit could prove to be a catalyst.
