DraftKings, Fantasy Sports Giant, Targeted by Class Action Lawsuit for False Advertising
YouTube.com screen grab
Chances are good that you or someone you know is a sucker for fantasy sports -- pretending that real-life players are on your imaginary team and competing against friends' teams based on how the real players fare in weekly performances.
This time-killing hobby for sports obsessives has ballooned in recent years like a ballplayer wolfing down steroids, thanks largely to online venues that pay out money to winners. By 2020, the fantasy sports industry is expected to pocket $31 billion in player fees.
But recent legal troubles may slow some of that growth. South Florida is the scene of one legal challenge against a big fantasy player. In late January, a class-action lawsuit was filed in federal court charging that one of the new industry leaders misleads players with false claims.
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Boston-based DraftKings is considered the second-largest online outlet for fantasy betting. Court records indicate the company handed out $200 million in prizes to the site's 1 million users in 2014. Each month, 200,000 players bet on fantasy action through the site, records indicate. In August 2014, the company announced it had secured $41 million in outside funding from a venture capital firm.
DraftKings' growth is tied to its aggressive advertising -- which is the problem, the lawsuit claims. In addition to having aired 1,782 television commercials in 2014, the site hooks potential players with a juicy promise: "You're going to double your first deposit, up to $600! That means that if you put in $100, you get $200 to play with..."
You can see a video of the offer below:
Not so, the lawsuit claims. After signing up for DraftKings and depositing money, "customers learn that the ubiquitously advertised, 100-percent deposit match is nothing more than a façade," the lawsuit says. "Despite promises in video promotions, on the main DraftKings webpage, and within the large text boxes where customers choose their deposit amounts, a customer's $100 does not become $200 upon deposit."
The lawsuit continues: "Specifically, customers must enter fantasy contests and receive bonuses in incredibly small increments. Rather than the guaranteed, instant, 100-percent deposit match, customers receive as a bonus a mere 4 percent of every dollar they put into play."
The lawsuit claims the company should be on the hook for false advertisement and fraud.
"Our intention isn't to bring down the daily fantasy sports industry," the plaintiff's attorney, Mason Kerns, tells New Times. "Given how big it is, that wouldn't be possible. I think they provide a great service, I just think it should be done in process that doesn't make someone think they're getting double their deposit."
If the lawsuit is verified as a class action suit, other plaintiff can jump into the legal action. Kerns is confident. "If we weren't confident we definitely wouldn't have filed it," he says. "There might be some hurtles. I'm sure DraftKings is well represented. I expect a battle."
Calls for comment to DraftKings' corporate offices in Boston were not returned by presstime.
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