DraftKings Under Legal Microscope in Massachusetts
Author:
Jacob McKenzie
DraftKings, a prominent US sports betting entity headquartered in Massachusetts, faces the prospect of a potential class-action lawsuit within its home state. The Public Health Advocacy Institute (PHAI), based at Northeastern University, in tandem with the Center for Public Health Litigation, declared their intention on Friday to pursue legal action. This initiative revolves around an alleged misleading promotion linked to a $1,000 bonus targeting new bettors in Massachusetts.
DraftKings, a major US sports betting operator headquartered in Massachusetts, is staring down the barrel of a class-action lawsuit within its home state, launched by The Public Health Advocacy Institute (PHAI) in collaboration with the Center for Public Health Litigation.
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Claim is That Customers Were Not Properly Informed About Terms of Bonus
DraftKings, a prominent entity in the United States’ sports betting arena, faces the possibility of a class-action lawsuit within its home state of Massachusetts. The Public Health Advocacy Institute (PHAI), based at Northeastern University, and the Center for Public Health Litigation have signaled their intent to pursue legal action, alleging a promotion by DraftKings that purportedly misled new bettors in Massachusetts with a promised $1,000 bonus.
At the core of this legal dispute is the contention that DraftKings failed to adequately communicate the conditions linked to the advertised $1,000 bonus. The lawsuit contends that customers were obliged to deposit $5,000 and place bets amounting to $25,000 within a 90-day period to qualify for the bonus. Adding complexity, the bets made were required to have odds of -300 or longer to be eligible for the promotion. The lawsuit further alleges that even if these criteria were met, bettors would only receive “non-withdrawable credits,” rather than the explicitly promised bonus.
Mark Gottlieb, the Executive Director of PHAI, highlighted the experiences of two named plaintiffs, Shane Harris and Melissa Scanlon, as indicative of a larger group of Massachusetts residents allegedly misled by DraftKings due to unclear bonus terms. The lawsuit posits that these customers were unaware of the necessity to engage in an average daily betting activity exceeding $276 for a duration of three months to receive the sign-up bonus. Furthermore, it asserts that had these individuals comprehended the terms beforehand, they would not have enrolled in the promotion.
DraftKings Will Be Defending Itself Against Lawsuit
DraftKings, a major player in the online sports betting realm, has responded to the assertions put forth by the Public Health Advocacy Institute (PHAI) and the Center for Public Health Litigation, expressing its intent to vigorously defend against the lawsuit. The company emphasized its attempts to engage in a face-to-face conversation with PHAI to address concerns, lamenting the swift recourse to legal action.
Massachusetts recently entered the domain of online sports betting in March, granting a limited number of mobile operators the legal capability to accept wagers within the state. However, the industry encountered criticisms and challenges regarding marketing regulations even before its launch. Consequently, regulators and lawmakers worked on adjusting marketing rules to ensure fair practices in the burgeoning online sports betting landscape.
Richard Daynard, a law professor at Northeastern University and president of PHAI, who previously engaged in legal battles related to tobacco, drew parallels between the escalating legal scrutiny faced by online gambling platforms and significant tobacco companies. Daynard asserted that DraftKings deliberately structured its promotion to maximize customer registrations, betting activity, and monetary expenditures, arguing that this practice lacks fairness considering the potentially addictive nature of gambling products.
Although the named plaintiffs are not alleging addiction injury, they seek various compensatory measures, including economic damages, statutory damages, treble damages, injunctive relief, and any additional remedies deemed appropriate. The lawsuit also calls upon DraftKings to discontinue similar promotional tactics in the future.
DraftKings Performed Especially Well in Massachusetts in September 2023
In September 2023, the online sports betting landscape in Massachusetts witnessed a substantial surge, particularly with DraftKings dominating the market. Official data unveiled that DraftKings facilitated a record-breaking $290.1 million in online sports wagers within the state, marking a significant rise and highlighting the growing enthusiasm for digital sports betting platforms among bettors.
The total betting handle for the state also experienced a remarkable increase month-on-month. September recorded a surge to $512.2 million, marking a substantial 62.7% uptick from August’s $314.9 million. This figure stands as the second-highest monthly total since the legalization of online sports wagering in March.
Online sports betting accounted for a lion’s share of the wagering activity, totaling $499.7 million, with an additional $12.4 million spent at retail sportsbooks. The heightened betting activity translated into a remarkable surge in taxable sports betting revenue, reaching $49.8 million for the month, indicating a staggering 119.4% increase from August’s $22.7 million. Of this revenue, $49.0 million came from online betting, while $783,017 originated from retail wagering.
The robust figures for September showcase the soaring momentum of the digital betting sector in Massachusetts. Only May surpassed the figures for this month, with a total of $59.4 million generated. This upsurge in online sports betting underlines the evolving dynamics of sports wagering in the state, with platforms like DraftKings playing a pivotal role in the sector’s flourishing landscape.
In the vibrant Massachusetts sports betting market, DraftKings maintains a significant lead. The industry heavyweight recorded an impressive $28.2 million in revenue from a total of $290.1 million in bets, setting a new record for monthly activity by a single operator. This firmly establishes DraftKings as the primary online sports betting platform in the state. FanDuel retained its second-place standing in the market, amassing revenue of $14.2 million, with bets totaling $121.9 million. Meanwhile, BetMGM secured the third position, posting $3.7 million in revenue from bets amounting to $33.5 million.
Turning to the retail sector, MGM Springfield surged to claim the top spot, reporting revenue of $289,320 from a handle of $1.6 million. Plainridge Park Casino witnessed higher retail bets, amounting to $4.6 million, resulting in slightly lower revenue of $282,699. Encore Boston Harbor led in wagers placed, recording $6.2 million, though it reported the lowest revenue of $242,313.
Churchill Downs Incorporated (CDI) Built Horse Racing App for DraftKings
Churchill Downs Incorporated (CDI), a prominent figure in the horse racing and gaming industry, announced a substantial multi-year collaboration with the sports betting giant, DraftKings, back in December 2022. This partnership aims to birth DK Horse, a dedicated parimutuel wagering horse racing product tailored specifically for the sports betting operator.
Under the terms of this agreement, CDI’s business-to-business (B2B) horse racing subsidiary, TwinSpires, will spearhead the development of this white-label solution for DraftKings. This initiative involves the transfer of TwinSpires’ advanced deposit wagering technology to DraftKings for the creation of DK Horse. Initially conceived as Churchill Downs’ direct-to-consumer (B2C) online betting and casino platform, TwinSpires underwent a strategic shift to become a B2B provider, responding to the challenging market dynamics encountered in 2021.
The deal outlines that CDI will extend parimutuel wagering rights to its proprietary content, including prestigious events like the Kentucky Oaks and the Kentucky Derby. Additionally, CDI will provide DraftKings access to additional horse racing content on behalf of the operator. Enthusiasts of horse racing can expect the arrival of DraftKings’ dedicated horse racing platform, DK Horse, in the near future, as the operator has disclosed its intention to launch in the “coming months.”
The upcoming horse racing betting product is designed to run as a standalone branded app, requiring existing customers to register and deposit funds into a separate account. However, the company has revealed plans to integrate this offering with DraftKings’ other products in the foreseeable future. With the anticipation of obtaining all requisite regulatory approvals, DK Horse aims to debut in 21 states. The launch timing is aligned with the 149th edition of the renowned Kentucky Derby, scheduled for May 2023.
Jason Robins, CEO and chairman of the board of DraftKings, asserted that the operator was greatly anticipating working with CDI, while also welcoming in a whole new sector of horse racing fans:
“We are excited to collaborate with Churchill Downs Incorporated, not only to give our existing customers an opportunity to engage with parimutuel horse wagering, but also to acquire new customers efficiently during marquee horse racing moments. Due to the structure of the agreement, we expect this new product offering to be immediately profitable.”– Jason Robins, CEO and Chairman of the Board, DraftKings,Press Release
DraftKings Stepped Into Maryland Back in November 2022
DraftKings, a formidable contender in the ever-expanding sports betting arena across the United States, officially entered Maryland’s swiftly evolving sports betting landscape in November 2022. This move represents a strategic advancement in DraftKings’ broader expansion plan across the country, entering a market that is progressively becoming more saturated with multiple operators.
The timing of DraftKings’ foray into Maryland is particularly noteworthy. Their online mobile sportsbook app was set to hit the market on November 23rd, 2022, closely following the introduction of Betfred’s physical retail sportsbook on November 18th, 2022. Both operators successfully navigated the essential early access test period, a pivotal phase mandated by the Maryland State Lottery & Gaming Control Agency. Their adherence to this step, along with the significant $500,000 application fee, underscores their unwavering dedication to establishing a foothold in Maryland’s vibrant sports wagering domain.
Maryland concluded its licensing process for mobile sports wagering on October 21st, 2022, after commencing this regulatory phase merely on September 7th. This rapid regulatory timeline highlighted the state’s proactive approach to prepare for the imminent launch of sports betting. Operators received regulatory green lights just ahead of several high-profile NFL games scheduled for Thanksgiving, signaling the fervent pace at which Maryland’s sports betting market is progressing, with players like DraftKings striving to carve out their niche in this thriving industry.
