DraftKings Inc (NASDAQ: DKNG) finds itself embroiled in a class-action lawsuit accusing the sports betting platform of deceptive advertising regarding its $1,000 bonus bet offer.
The suit, filed by the Public Health Advocacy Institute on behalf of two Massachusetts residents, alleges that the promotion's stringent terms mislead customers into thinking they'd receive a $1,000 bonus with a deposit when, in reality, they needed to deposit $5,000 and wager $25,000 within 90 days to qualify.
Citing the lawsuit, the Financial Times noted that the bonus would be paid out only in non-withdrawable credit.
The institute contends that DraftKings' advertising was deliberately misleading to new customers unfamiliar with sports betting jargon and the intricate details buried in the fine print.
The lawsuit highlights the nonprofit institute's history of supporting litigation against addictive product manufacturers, drawing a parallel to the precautions marketing such products should take to minimize addiction risks.
Although the suit doesn't claim the promotion caused addiction, it emphasizes the responsibility of companies dealing with addictive products.
Bonus offers for new users have become a norm in the sports wagering landscape, especially following the expansion of sports betting beyond Nevada in 2018, now available in 37 states, Bloomberg reported.
DraftKings, operating in 22 states, ran the $1,000 bonus promotion from July 1 to December 31, seemingly contributing to tripling its stock value this year.
The lawsuit is backed by Richard Daynard, a legal expert known for leading litigation against Big Tobacco, who chairs the Public Health Advocacy Institute.
Daynard aims to challenge the industry's narrative, shifting it from a monologue to a dialogue, emphasizing the alleged deception in DraftKings' bonus offer and its exploitation of the addictive nature of sports betting.
Price Action: DKNG shares are trading higher by 0.25% at $35.49 premarket on the last check Friday.