(Bloomberg) -- DraftKings Inc. has been hit by a class-action suit alleging that advertising for the sportsbook’s $1,000 bonus bet offer is “unfair and deceptive” because the terms to qualify are so onerous.
The Public Health Advocacy Institute, which filed the suit on behalf of two Massachusetts residents, accused DraftKings of designing its promotion to mislead new customers into believing they’d receive a $1,000 bonus after depositing money into their account.
In order to obtain that amount, a customer needs to deposit $5,000 and wager $25,000 within 90 days, according to the suit filed at a state court in Massachusetts. The bonuses also can’t be redeemed for cash or transferred.
According to the complaint, “DraftKings knew, or should have known, that its advertisement and promotion was deceptive to their target customers, who were new to sports betting and were extremely unlikely to understand the gambling lingo in the fine print.”
In a statement, DraftKings said it disagrees with the claims in the suit and intends to vigorously defend itself.
“As a customer-first organization, DraftKings takes consumer protection and responsible gaming seriously,” the company said. “The institute ignored our multiple attempts to engage in an in-person dialogue to carefully examine their concerns and, instead, filed suit.”
The institute is a nonprofit known for aiding in litigation against cigarette companies, vaping gear manufacturers and other addictive products.
While the plaintiffs aren’t alleging the promotion made them addicts, marketers of a known addictive product should take special precautions to minimize that risk, the filing said.
Bonus bets for new users have become a regular feature of sports wagering as it has spread across the US. Since the Supreme Court allowed to expand beyond Nevada in 2018, some 37 states now offer it. Companies often employ such offers when trying to get a foothold in a newly authorized state or region.
DraftKings has been offering the $1,000 bonus in 22 states, in a promotion running from July 1 to Dec. 31, according to its website.
Shares of the Boston-based company have been on a tear, more than tripling this year, as DraftKings gained new customers and pared its quarterly losses. DraftKings closed up 1.4% on Friday after MoffettNathanson Research increased its target price for the stock to $45 from $41.
(Updates with statement from Draftkings in fifth paragraph.)
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