Three nearly-identical class action lawsuits filed recently in New York and Illinois provide a valuable lesson for companies that offer credit-based promotions or promotions that use the word “free.” The complaints against gambling operators – Caesars, BetMGM, and American Wagering, Inc. d/b/a William Hill and Caesars Sportsbook – allege that the operators make untruthful and deceptive promises to consumers by offering “free bets” and “risk-free bets.”
More specifically, plaintiffs claim that the operators’ ads and signup process fail to properly disclose that the initial bet is not without risk and that in reliance on the operators’ promises, they believed they would be reimbursed by the operator for amounts wagered on the initial “risk-free bet.” In reality, however, the operators provided plaintiffs with website credits that they were required to use within a short period of time. Plaintiffs used those credits to make additional bets but still had less money than they initially deposited and wagered. Plaintiffs contend that consumers who sign up for accounts with these operators without the benefit of accurate information and who end up with unreimbursed losses should be made whole.
The complaints refer to similar practices by other sportsbooks and specifically allege that a number of operators have recently ceased making “risk-free” marketing representations. The complaint also quotes statements from representatives of the National Council on Problem Gambling indicating that “‘risk-free’ has always been problematic language” and is “deceptive.” They also cite many news articles focused on concerns surrounding “risk-free” bets and regulatory attention on the topic and statements from both the Ohio Casino Control Commission and New York Attorney General.
All three suits seek to certify a state-specific class and a nationwide class:
- In the two New York cases, plaintiffs seek to certify a New York class under New York’s deceptive acts and unlawful practices law, alleging that the operators’ conduct was not only deceptive, but also unlawful because gambling advertisements must comply with the state’s law requiring fairness in gambling advertising and with the advertising guidelines issued by the National Council on Problem Gambling. Plaintiffs seek to recover the New York class’s actual damages or statutory damages of $500 per violation, whichever is greater.
- In the Illinois case against Caesars Sportsbook, plaintiffs seek to certify an Illinois class under Illinois’ deceptive acts and unlawful practices law based on similar claims as those brought in New York. Plaintiffs seek to recover actual or statutory damages.
- All three suits also seek to certify a nationwide class, asserting common law claims of negligent misrepresentation, intentional misrepresentation, fraudulent inducement, and quasi contract/unjust enrichment/restitution. Plaintiffs seek restitution of all fees paid to the operators by class members as a result of the violative conduct, disgorgement of all gains derived from the misconduct, actual or compensatory damages, and punitive/exemplary damages.
These may not be the only suits filed against operators based on these concerns and allegations. In fact, regulators have previously expressed concern or brought enforcement actions in relation to related marketing practices. For instance, Ohio prohibits sportsbooks from advertising promotions as “free,” “free bets,” or “risk-free” when customers are required to bet their own money first. Recently, the Ohio Casino Control Commission sent letters to BetMGM, Caesars, and DraftKings alleging violations and seeking a $150,000 fine from each company.
While these suits target gambling operators, they offer a cautionary tale to any company that relies on credit-based promotions to attract consumers, as the non-gambling-related causes of action listed above could apply to any industry. This is a good time to work with your marketing and product teams to assess and appropriately modify your current promotions and marketing disclosures.