DraftKings “Risk-Free” Bets? Lawsuit Says They’re Anything But

DraftKings ran a deceptive promotion that told new users, if they signed up, their first bet would be risk-free, a new lawsuit alleges. However, the customers were in fact risking losing their own money, it says.

New York resident Samantha Guery filed the proposed class action lawsuit against DraftKings Inc. on April 17 in a New York federal court, alleging violations of state and federal consumer laws.

Guery said she signed up for the DraftKings promotion in July last year, and made what the company advertised as a “risk-free bet.” 

However, when she lost, she found the “free bet” DraftKings promised her she would end up with was worth substantially less than the amount of cash she had paid initially, she said.

Luring new customers with false promises?

In 2018, the Supreme Court held that states could legalize sports betting. This opened the doors for companies like DraftKings to gain access to millions of new potential bettors, the lawsuit says. Motivated to capture new customers, the sportsbooks companies invested heavily in incentives like sign-up promotions and bonuses.  

DraftKings targeted certain promotions at potential new customers who may have been reticent about risking their money, the lawsuit says.

But rather than put as much of its own money on the line as it implied to new customers, DraftKings used misleading promotions to lure new users into opening accounts while believing the promotional offers they responded to were financially more advantageous to the consumers than they actually were, Guery says. 

The deceptive details: Losing money on "free" bets

Guery is suing DraftKings for its promotion that required customers to place a bet with their own money, and promised customers that if they lost their “risk-free bet,” instead of having to pay up, they’d be credited with a “free bet.” 

However, customers who won with this credit were then paid less than half what they would have made placing the same wager with cash, the lawsuit alleges.

“The difference renders the supposed ‘risk-free’ promotion anything but risk free,” it says.

The lawsuit alleges that DraftKings paid for large-scale marketing campaigns to promote the allegedly false Risk-Free Bet. It says the advertisements contain “materially deceptive representations” that allowed DraftKings to sign up thousands of new customers, to their own detriment. 

The new customers did not receive the advertised benefit of the promotional Risk-Free Bet, the lawsuit alleges, and in many cases they placed larger bets than they would have if they hadn’t been deceived.

Not DraftKings' first legal hurdle

This is not the first class action lawsuit DraftKings has faced alleging it offers unfair promotions. 

In December last year, a lawsuit was filed in the Massachusetts Superior Court alleging DraftKings knowingly designed a $1,000 sign-up bonus to mislead new customers into joining the platform and maximizing their wagers. The lawsuit was reportedly backed by Richard Daynard, a lawyer who previously led litigation against the tobacco industry that led to a $260 billion settlement, the Financial Times reported.

In March last year, the company faced another proposed class action in a Massachusetts federal court alleging violations of federal securities laws in regard to DraftKings NFTs, causing investors “significant damages.” 

The plaintiff in this case is looking to represent any DraftKings customer who wagered in the state of New York and utilized a DraftKings promotion advertising a “risk-free” bet with the company and lost their first bet. She is seeking certification of the class action, damages, fees, costs and a jury trial. 

The plaintiff and the proposed class are represented by Reese LLP, Boies Battin LLP and Lockridge Grindal Nauen PLLP.

The DraftKings deceptive promo class action lawsuit is Guery et al v. DraftKings Inc., Case No. 24-cv-02921 in the US District Court for the Southern District of New York.