Now legal in 38 states, online sports betting has become very big business. In 2024, FanDuel and DraftKings – two of the largest operators in the space – generated almost $4.8 billion and $5.78 billion, respectively. Unsurprisingly, these companies fiercely battle to both acquire and retain new users.
For sportsbooks, user retention is a relatively straightforward concept: keep people gambling as much and as frequently as possible. But as these gambling companies pour exorbitant sums into keeping users engaged, they are being forced to reckon with the inherent tension between maximizing profits-per-user and any duty it might have to avoid exploiting gambling addicts through the use of coercive and/or predatory practices.
In a recent spate of civil lawsuits against DraftKings and FanDuel, customers have accused the sports betting giants of crossing that line, and violating its own policies in the process, to take advantage of known gambling addicts. In four cases filed since October 2024[1], plaintiffs’ claims largely fall into two buckets:
First, these plaintiffs allege that the companies ignored obvious, tell-tale signs of serious gambling addiction: increased betting frequency and amount, betting to “chase” losses, the use of company credit cards, and exceeding monthly deposit limits. Despite the fact that the sportsbooks knew (or should have known) that the plaintiff had a gambling addiction, they encouraged their VIP hosts to bombard the plaintiffs with offers, enticements, and bonuses to keep them gambling. According to the lawsuits, the predatory actions by the VIP hosts violated not only federal Know-Your-Customer (“KYC”) and Anti-Money Laundering (“AML”) regulations but also the companies’ own internal policies about source of funds verification and identifying problem gamblers.
For example, in Patel v. FanDuel, the plaintiff admits to stealing hundreds of millions of dollars from his former employer, the Jacksonville Jaguars, to gamble on FanDuel Daily Fantasy Sports (“DFS”) contests. But he contends that based on his highly suspicious betting patterns, his use of a company credit card, and the company’s intentional circumvention of KYC and AML safeguards, the company knew that he had a gambling problem. Despite that knowledge, Patel’s VIP host bombarded him daily with offers and incentives to keep gambling with stolen funds. The plaintiffs in D’Alessandro, De Leon, and Fischer each plead similar fact patterns.
In short, the plaintiffs contend that sportsbooks have a duty to intervene and cut-off customers displaying the hallmarks of problem gambling. FanDuel and DraftKings allegedly breached that duty by encouraging known gambling addicts to continue to recklessly gamble.
Second, the plaintiff in De Leon v. DraftKings also accuses DraftKings of violating false advertising and other consumer protection statutes by marketing “Risk-Free” bets that are anything but. “Free” bets or deposit matches are common user acquisition strategies. These promotions, however, often come with strings attached – buried in the fine print – that can confuse consumers.
For example, in De Leon, the plaintiff points out that DraftKings advertised “risk-free” bets that were, in fact, quite risky. With respect to the specific promotion cited, users that lost their initial “risk-free” bet were not placed in the same position they were in before. Instead, DraftKings provided these users with a “bonus bet” that could not be redeemed for cash, had to be wagered, and even if successful paid out at far less than a standard wager.
Summary
Online sportsbooks often tout their commitment to “responsible gambling” – but at what point are they obligated to step in and protect users from themselves? While these lawsuits are still in their nascent stages, they may go a long way in determining whether these companies have a duty to cut off problem gamblers and, if so, outlining the scope of that duty.
Moreover, sign-up and deposit promotions are often advertised as “free” or “risk-free” money. Do the fine print disclaimers adequately notify users about the true nature of these “free bets”? Or do DraftKings and FanDuel market them in a way likely to cause customer confusion?
It’s too early to tell whether these issues will ultimately be litigated. We’ll continue to monitor these cases and provide updates as they progress.
[1] Patel v. FanDuel, et al., Case No. 1:24-cv-07402 (S.D.N.Y. 2020); D’Allesandro v. DraftKings, Inc., et al., Case No. ESX-L-008442-24 (N.J. Sup. Ct. 2024); De Leon v. DraftKings, Inc., et al., Case No. 1:25-cv-00644 (S.D.N.Y. 2025); and Fischer v. DraftKings, Inc., Case No. 1:25-cv-01299 (S.D.N.Y. 2025).
For more information on civil litigation, please contact Benjamin Kussman, Esq. at [email protected].
