The Many Class Action Lawsuits against Online Gambling

By Olivia Marcoccia ‘28

Gambling has been around for centuries, but recently, it's become easier than ever for people to lose big, and they can do it from the comfort of their own homes. Gambling apps or “Social Casinos” like DraftKings and High 5 Games are very popular due to their addictive nature and their excessive, often false, advertisements. Even though gambling is not legal in every state across the U.S., sports betting was legalized in 2018 with the Supreme Court case Murphy v. NCAA, and Social Casinos get past the law by not classifying as “gambling”. Still, many companies, including DraftKings, High 5 Games, Apple, and Google, have managed to find a way to allegedly break the law.

DraftKings

It's difficult to watch or listen to any digital media without being subjected to a DraftKings advertisement. These advertisements almost always announce some kind of offer.

A popular one is their "Risk-Free Betting.” The offer appears to promise users that the money they bet for the first time is money they will get back if they lose, making the bet “riskless”. The over-a-thousand-word terms for this promotion, which are written in a small font, not shown to the customer, and are not required to be clicked on by the customer to take part in "risk-free betting", prove that these bets are still very risky. In this promotion, users have to bet their own money. If they lose that bet, their money is not returned to them. Rather, they receive "bonus bets" that expire. "Bonus bets" have to be bet and won in order for them to have any cash value, but even if a user does win with a bonus bet, the payout is not equivalent to if the user had bet U.S. dollars. An Illinois Class Action against DraftKings provides the following example: "A winning $100 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 Bonus Bet converts only to $100 US dollars less vig, which results in a payment of approximately $91."

This isn't DraftKings' only misleading promotion, though. The company has also run advertisements that claim to match a user's first deposit of up to a thousand dollars. Again, the terms for this promotion are abysmal for the consumer and beneficial for the company. For a user to actually get a thousand dollars, they have to deposit five thousand dollars (five times the amount the user wants matched). Then, the user has ninety days to risk twenty-five thousand dollars (twenty-five times the amount of money DraftKings will match) in sucker bets (meaning that the minimum odds of winning are -300). Finally, if the user jumps through these hoops, they are rewarded with "DK Dollars", only good for betting, instead of receiving actual money.

These advertisements and the confusing, hidden terms have led to DraftKings being sued in Illinois, Kentucky, and New Jersey for...

1) Violating the state's Consumer Protection and Fraud Acts: advertisements are meant to induce a consumer to join/buy/do something, and thus, they must be representative of the actual product/offer,

2) Intentional Misrepresentation: Companies cannot knowingly deceive consumers,

3) Unjust Enrichment: when two parties/people agree to something but only one party/person upholds their end of the deal while the other does not,

4) Negligence: when a company/person does not act to resolve or prevent foreseeable actions that could lead to injury (monetary or physical),

5) Civil Conspiracy: two parties/companies/people cannot agree to commit a civil wrong, commit that wrong, and harm a third party/person or people as a result, and

6) Conversion: the civil version of theft.

Since the trial has yet to take place, it is unclear which of these allegations DraftKings will be found liable for, if any. What can be said is that all of the above claims have merit and are unlikely to be dismissed by the court. Even with these lawsuits, DraftKings continues to promote "Risk-free betting" and claims to match users' deposits. If DraftKings is found liable for the first, second, third, or sixth claims, the sports betting industry would need to find a new way to entice new users to use their platforms.

High 5 Games

High 5 Games has found itself the defendant in many of its own class action lawsuits. High 5 Games and every other mobile gambling app are classified as "social casinos". This means that gambling laws don't apply to them. The loophole here is that customers use actual money to buy coins in the apps, which are then used to gamble and can be exchanged for money if the customer wins. Since there technically is no actual money gambled, these games claim to be solely for entertainment and bypass laws regarding gambling entirely.

The first verdict ever from a social casino class action case came from Washington earlier this year. High 5 Games was ordered to pay twenty-five million dollars because it was found that their practices did constitute gambling, which is mostly illegal in Washington. At this point, High 5 Games can appeal the ruling or accept the verdict. Another Washington lawsuit is still ongoing against High 5 Games, despite the defendant's (denied) motion to dismiss. The plaintiffs are seeking recovery for the money they lost to High 5 Games. This works under RCW (Revised Code of Washington) 4.24.070, which states that anyone who loses money or something of value to illegal gambling can recover those losses through the courts. The plaintiff first has to prove that High 5 Games is a type of gambling, that it is illegal, and that the chips bought in High 5 Games are "something of value". Since a verdict has already been reached in Washington about High 5 Games' classification, the plaintiff should not have a hard time proving that the games constitute gambling. Similarly, in order to prove it's illegal, the plaintiff simply has to cite the Washington laws against gambling. The hardest part of the suit will be proving the value of the aforementioned chips that players have to buy to interact with the games. Still, this shouldn't be a challenge since the chips are exchanged for actual money when players buy them and when players win on these games of chance.

Apple and Google’s Involvement

A New Jersey class action against Apple, Google, and a couple of casino apps argues that Apple and Google's app stores turn mobile devices into “illegal gambling devices and/or slot machines.” This lawsuit also brings up the fact that Apple and Google receive 30% of all in-app purchases. Another topic it notes is the many complaints that users have made against the social casinos, which have been met with zero response on Apple’s or Google's end. Ultimately, Apple and Google don't have much to worry about. It is not their job to determine what is illegal gambling , so the idea that they should be held liable for not removing these apps from their platforms is imprudent. The notion of Apple and Google assisting in turning devices into illegal slot machines is unique and could be well-argued by the plaintiffs. However, Apple and Google have too much money and resources in their legal department to lose this argument.

All of these lawsuits against betting and gambling platforms have the potential to make big changes to the laws of digital gambling. Even if nothing comes from them, which is fortunately unlikely to be the case, these suits are great examples of what consumer protection acts were made for: stopping companies from using predatory techniques to entice people to use their addictive products. Furthermore, it is interesting to watch the laws being challenged and hopefully modernized to keep up with the digital world.

Olivia Marcoccia is a freshman majoring in English.

Sources

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