By Jared Good, Esq.
As any sports enthusiast can attest, there has been an explosion of commercials of late, advertising single game parlays and opportunities to make quick cash. A constant in all these commercials is the idea that potential bettors can make large bets without threat of losing the initial deposit they made. Barstool Sports promises a $1,000 “bonus” for the first made bet; Caesars Sportsbooks offers new customers – and in certain occasions existing customers – a “free bet” worth up to $5,000, a “risk-free” bet of the same $5,000 total, or “FREE $1,250,” and BetMGM offering a “risk-free first bet” up to $1,000.
However, according to a recent lawsuit filed against BetMGM, these claims are not factually supported by how the system works. In actuality, the process involved with these “free” bets can lead to a bettor losing the entirety of their deposit. In their initial filing, the plaintiffs laid out an example of how BetMGM’s system functions:
[f]or example, if a new user places a $1,000 “risk-free” or “free” first bet at BetMGM, that person is required to deposit and wager $1,000 in real dollars with the website. If the bet is successful, the winnings are paid out as usual. If the bet loses, however, the customer is credited with the amount lost, not in cash, but in bet credits that can only be used on the BetMGM app—and that expire in only seven days.
Subsequent bets made with those bet credits are not risk-free. In fact, if such bets lose, a bettor receives no compensation whatsoever. Instead, a consumer would have to win a subsequent bet or series of subsequent bets made with the credits provided just to break even.
This structure was further developed through a Washington Post article that was cited by the plaintiff:
[s]y someone places a $1,000 “risk-free” first bet at BetMGM, which requires depositing and wagering $1,000 in real dollars. If the bet is successful, the winnings are paid out as usual, with no additional bonus. If it loses, the customer is credited with five $200 “free bets,” which expire after a week. The stake of a free bet isn’t paid out with any winnings, meaning a successful $200 free bet at even odds returns
roughly $190, accounting for the sportsbook’s built-in advantage, or vigorish. In other words, a new customer who loses his “risk-free” bet but then manages to win all five free bets at even odds, a 1-in-32 feat, would fail to break even. Lose them all, and that customer comes away down $1,000.
The claim of “risk free” was the past standard for most sportsbook companies as recent as 2020, before the operators decided to change their business practices to counteract heavy losses. As this practice fell out of favor in the industry, notable competitors ceased using the phrase in their advertising such as PointsBet, Tipico, Betfred, but most noteworthy is FanDuel Sportsbook.
BetMGM, however, continued to make use of the “risk free” phrasing as recently as 2023. The plaintiff alleges that within these flashy advertisements, nowhere does BetMGM mention the potential loss of the bettor’s entire initial deposit, nor does it mention that the bettor does not recuperate the full extent of their losses. The plaintiff alleges that his loss on a $10.00 cash wager, was the direct result of BetMGM’s advertising scheme. Instead of receiving what he assumed would be a refund on the initial wager, the plaintiff received website credits that had to be used within a week of receipt. Even after making use of these credits, the plaintiff still ended up with less money than he originally started.
Given the nationwide impacts of BetMGM’s reach, the plaintiff filed seeking class-action certification. The suit lays out the base requirements for any class action certification: numerosity, commonality, adequacy of representation, and typicality.
The classes were separated into two groups: a nationwide class and a specific New York class.
Nationwide Class:
All persons who signed up for a “free bet,” “risk-free” bet or similar
promotion with Defendant and lost any portion of their first bet.
New York Class:
All New York persons who signed up for a “free bet,” “risk-free” bet
or similar promotion with Defendant and lost any portion of their
first bet.
Given the nationwide reach of BetMGM, the plaintiff was not able to ascertain the exact figure of members who would join in the certification, but they estimated that the class would contain greater than one-hundred members in accordance with certification standards.
Plaintiff alleged that within the class, there would be common questions of law and fact that would be shared by those in the suit:
a) Whether Defendant’s advertising and promotional offers promises consumers that their bets would be “risk-free,” “free,” and/or “on us;”
b) Whether Defendant adequately disclosed the facts and/or risks concerning the use [of] the BetMGM service;
c) Whether Defendant’s representations and omissions about the BetMGM service are false, misleading, deceptive, or likely to deceive;
d) Whether Defendant’s actions or inactions violated the consumer protection statutes invoked herein;
e) Whether Defendant’s actions and inactions violated the common law causes of action invoked herein;
f) Whether Plaintiff and the Class members were damaged by Defendant’s conduct;
g) Whether Plaintiff are entitled to a preliminary and permanent injunction enjoining Defendant’s conduct.
These common questions amongst the class members predominate over the claims that would otherwise only affect individual members of the class. These questions were alleged to have been so numerous and substantial, that they would affect all members given the Defendant’s conduct being uniform and applicable to all members.
Similar to the commonality requirement, typicality of the claims exhibited by class members can be shown simply through suffering the same form of harm as a result of the advertising scheme used by BetMGM.
Finally, the adequacy requirement was argued that the Plaintiff was willing to fairly and comprehensively represent other class members, who like him, had suffered the same or similar harms because of BetMGM’s business practices.
The Plaintiff alleges violations of N.Y. Gen. Bus. Law §§ 349 & 350; negligent misrepresentation; intentional misrepresentation; fraudulent inducement; and quasi contract/unjust enrichment/restitution.
As this suit was only recently filed on March 3rd, 2023, there has yet to be an answer filed by BetMGM in response to the claims alleged against them. Going forward, this presents an interesting legal question on how sports betting companies are able to advertise their services as more-and-more states legalize sports betting within their jurisdictions.
