By Christopher R. Deubert, Senior Writer
When sports betting was legalized in Massachusetts in August 2022, Boston-based DraftKings made the Commonwealth the target of aggressive advertising. As sports fans have become all too aware in recent years, such advertising is ubiquitous as the major sports betting operators fight for market share. Some of DraftKings’ promotional practices are now the subject of a putative class action lawsuit initiated by a public health advocacy group. The lawsuit reflects well the potential dangers of sports betting marketing, particularly in Massachusetts.
Massachusetts’ Sports Betting Law
On August 10, 2022, Massachusetts became the 36th state to legalize some form of sports betting. With a large and passionate sports fan base, and extensive preexisting culture of illegal sports betting, it was a big win for the legal sports betting operators. The text of the law – and that it took so long to pass – is also reflective of particularized concerns in Massachusetts.
Contemporaneous with the law’s passage, there was considerable discussion around problem gambling, a term that includes gambling addiction and other harmful, repetitive gambling behaviors. However, as the Boston Globe reported at the time, the Commonwealth did not know how many problem gamblers there were. The most recent study, published in 2015, found that about 2% of Massachusetts adults had a gambling problem, about the same as most other states. There were and are concerns that in fact Massachusetts has a particularly large gambling problem.
For this reason, the Massachusetts law contains extraordinary consumer protections. The law includes voluntary exclusion lists and other common regulations but also: (1) requires operators to submit a problem gambling plan annually, in consultation with the department of public health; (2) prohibits lines of credit; (3) prohibits the use of credit cards; (4) creates a Sports Wagering Fund to distribute sports wagering revenues to a variety of youth programs; and, (5) requires the Massachusetts Gaming Commission to research “the social and economic effects of sports wagering in the commonwealth and to obtain scientific information relative to the neuroscience, psychology, sociology, epidemiology and etiology of sports wagering” and to “make scientifically-based recommendations” on an annual basis.
The Law In Practice
As anticipated, there was a large market for legal sports betting in the waiting. According to data from the Gaming Commission, between March and October 2023, an average of $451,033,643 was wagered every month. On average, $228,561,316 (50.7%) of that was wagered with DraftKings, by far the market leader in the state. The Commonwealth has collected average monthly taxes of $8,981,756 on those wagers.
Nevertheless, handles of those amounts do not come without some concerns. Although sports betting did not begin in Massachusetts until March 2023, a recent report from the Gaming Commission concerning gambling activity in 2022 identified that 31% of gamblers “could be classified as problem gamblers.”
The Consumer Lawsuit
On December 8, 2023, two DraftKings accountholders sued the sports betting operator alleging that one of its promotional offerings violates Massachusetts consumer protection and false advertising laws. Specifically, the plaintiffs take issue with a promotional offer through which DraftKings offered new customers a “$1,000 Deposit Bonus” for opening a new account. According to the plaintiffs, it looked like a new account of any value would automatically receive an additional $1,000 for wagering.
In fact, plaintiffs allege, the $1,000 bonus was a ruse only discoverable through the “unreadable” fine print. In order to obtain the bonus, a customer would have to meet three criteria: (1) deposit at least $5,000 initially; (2) make at least $25,000 in wagers within 90 days; and (3) the $25,000 in wagers would have to be bets with odds of “-300 or longer” (bet $300 to win $100).
According to the plaintiffs, these requirements would leave customers “chasing the money” and “statistically likely to lose money.” To this point, plaintiffs allege that “they would have had to wager an average of more than $276 gambling on sports every day for three months” to meet the bonus requirements. Because the bonus was directed to new sports bettors, plaintiffs alleged that the promotion was intentionally deceptive and predatory.
The plaintiffs seek to represent a class of Massachusetts citizens who opened a DraftKings account in response to the bonus offer. They are represented by the Public Health Advocacy Institute, a Boston-based non-profit that pursues litigation and legislative changes to protect and promote consumer health. The organization has its roots in the anti-smoking movement. Mark Gottlieb, one of the Institute’s attorneys, told Law360 that the “market for sports gambling is simply out of control” and hoped this action would be “the first of many” challenging the industry.
DraftKings issued a statement denying the claims and promising to defend itself, while reiterating that it “takes consumer protection and responsible gaming seriously.”
The case is Scanlon v. DraftKings, Inc., 23-cv-3402 (Mass. Sup. Ct.).
Deubert is Senior Counsel at Constangy, Brooks, Smith & Prophete LLP.
