DraftKings faces class-action lawsuit over “free bets”

DraftKings has run into new legal woes this week, with the company now facing a new class-action lawsuit against it which concerns the practice of "risk-free" bets. The lawsuit was filed on behalf of Samantha Guerry, who is represented by Reese LLP, and who argues that the promotion is misleading.

The lawsuit specifically cites New York law, quoting Business Law Section 349, which explicitly prohibits businesses from using deceptive practices, which is precisely the case according to Reese LLLP and Samantha Guerry. The lawyers now want to see the court side with them and acknowledge that risk-free wagers are in fact misleading and order DraftKings to reimburse affected parties.

A similar opinion has been heard among lawmakers and industry observers who have generally taken a dim view of the concept of a "risk-free" bet finding it slightly misleading. Guery’s attorneys claim that the bet cannot be construed as "risk-free" because customers are always obligated to wager their own money first.

In fact, the American Gaming Association, an influential gambling trade body in the United States, has already said that its members should stop using "risk-free" promotions as per the organization’s Responsible Market Code, which was changed to reflect this last year.

The way these wagers work is to allow a customer to bet again if they lose the money the first time. Another issue with the concept, according to the lawsuit, is that a risk-free bet would generate a smaller return compared to a customer using that exact same money of their own cash to place a wager directly.

The lawsuit alleges that the free bet is worth less than half of the "initial bet" and therefore the use of the "risk-free" wording in promoting these wagers is not exact, nor a good marketing practice.

The lawsuit was filed with the Southern District of New York, and it will be a second legal challenge for the company this week, after DraftKings pursued the case against its former employee, Michael Hermalyn, who the company alleges to have helped a competitor, broken his non-compete clause, and possibly stolen sensitive company information.

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