DraftKings’ use of “risk-free’ bets as a promotion is coming under heavy fire in the state of New York. Earlier this week, a New York resident, and DraftKings customer, named Samantha Guery filed a class-action lawsuit against the sports betting giant in the Southern District of New York alleging the practice amounts to deceptive advertising. It’s not the first time DraftKings has faced this issue and, barring any major changes in its marketing practices, it won’t be the last.
In her filing with the court, Guery points out that “risk-free” and “free” bets aren’t really risk-free or free saying, “The promotion required that the customer place a bet with their own money. If a customer lost their bet, they were not returned to their original position. Instead, their accounts were credited with a “Free Bet” that was worth less than its counterpart in U.S. dollars implied by the promotional materials.”
Just in case the judge in the case hasn’t actually fallen for the “free bet” ruse in his or her own life, Guery breaks down the process noting, “Free Bets cannot be withdrawn and must be wagered to be converted to U.S. dollars. Furthermore, wagers made with Free Bets are not paid out like wagers made with U.S. dollars. A $100 winning bet made with U.S. dollars at even odds recovers the $100 stake plus the $100 winnings less the sportsbook’s cut (known as the “vig” or “rake”) of 9%, which results in a payment of approximately $191. By contrast, a winning bet made with a $100 Free Bet converts only to $100 US dollars less vig, which results in a payment of approximately $91.”
Given that several states have already banned the use of the terms “free” and “risk-free” – and that most US-facing operators have stopped using the terms voluntarily – it’s surprising that DraftKings continues to use them in New York. There’s no word on when a judge will actually consider the case, or if DraftKings will voluntarily settle the case out-of-court.