Introduction
In 2018, the Supreme Court struck down a decades-long federal ban on sports betting in Murphy v. Nat'l Collegiate Athletic Assoc.[1] Prior to Murphy, anyone seeking to place a bet on a sporting event generally had to live in or travel to Nevada. Since 2018, nearly 40 states and the District of Columbia have allowed sports betting in some form, with around 30 states allowing sports betting on a mobile device. A 2024 survey found that 1 in 5 Americans now have a sports betting account, with over 90% using a sports betting app on their phone.[2]
Sports betting has become a billion-dollar industry since 2018, with companies bringing in an estimated $14 billion in profits in 2024, and states collecting around $2.5 billion in taxes. There are numerous sports betting apps available to consumers, and the landscape has shifted so much that celebrity endorsements and advertisements for the apps now run frequently during televised sporting events.
Recent Trends in Sports Betting Litigation
As the industry has grown and access has expanded, so has litigation against sports betting companies. To date, cases have been filed in both state and federal courts around the country in which plaintiffs' attorneys are focusing on advertising promotions that promise "risk-free" betting.[3] These lawsuits include putative class actions and allege that this language deceives new customers by suggesting that they won't lose money if they use the app to place sports bets. Plaintiffs also claim that sports betting apps target young people and exploit gambling addictions. The ways in which cell phones and computers can exacerbate addictive behaviors has led some to draw comparisons between sports betting lawsuits and decades of tobacco litigation.
A few key patterns have emerged among the sports betting lawsuits. In many cases, app creators were offering fantasy sports games before Murphy eliminated the federal sports betting ban, and plaintiffs' lawyers allege that these games were accessible to underage users. Some plaintiffs allege that they were groomed for addiction after exposure to sports betting through fantasy contests before they were old enough to legally gamble. Plaintiffs have also argued that sports betting app companies tend to focus their resources and offers on new and casual gamblers because they are more likely to lose money than sophisticated gamblers, whose activity may be dynamically limited by an app as it collects more data.
In one case, a plaintiff alleges that when he would try to take a break from the app after losing more than he could afford, a "VIP host" (an employee of the app company) would reach out to him personally via text message to entice him back to the app with offers of "free bets"—offers that often ultimately required him to deposit more money.[4] In another case, a plaintiff sued a sports betting app after he was convicted of embezzling over $20 million from his employer, most of which he lost while gambling.[5] In that case, the plaintiff alleges that the app company knew he was gambling with stolen money, and that the VIP host assigned to him admitted that the app company was breaking the law in allowing him to continue to make deposits into his account.
Many lawsuits have focused on promotional language offering risk-free or bonus bets, alleging that the ads for these offers obscured or even lied about the user's chances of winning. Other promotions offered a deposit match. Plaintiffs have pointed to the ubiquity of sports betting advertisements across social media platforms and during live sporting events, as well as in-app promotions and push notifications, and noted how these promotions either do not explain how the bets or deposit matches work, or do so in small, difficult to understand text. According to some plaintiffs, the risk-free bets were not risk free because if they lost, they would have to gamble again to recoup their money. Similarly, the deposit "matches" could not be accessed unless the user gambled the deposit amount, and in some cases the match was not real money but instead a currency internal to the app, which had to also be gambled to be converted into real money.
Court Rulings to Date
Because states have been somewhat slow to legalize sports betting after the fall of Murphy in 2018, lawsuits over sports betting apps have only recently emerged and are for the most part still in their early stages.
One of the more advanced class action lawsuits[6] (Scanlon, Mass. state court) is still in the discovery phase after the trial court denied the defendants' motion to dismiss. The motion was denied in part because for the purpose of deciding the motion, the court took as true the plaintiffs' allegation that they would not have made a deposit into the sports betting app but for what they called a "false and misleading promotion."[7] The court in Scanlon stated that although the small print appeared to accurately describe the conditions under which a user could collect a bonus deposit, more information was needed to determine if the designs of the app and website were deceptive enough to trigger the state's consumer protection laws. Although the court in Scanlon denied the defendants' motion, it noted in its opinion that it did not accept the initial pleadings conclusions that because gambling is addictive, sports betting app companies are required to "take special precautions to minimize addictive risk," or that gambling "is not a typical consumer product[.]"[8]
One case involving an employee who embezzled money he later gambled[9] (Patel, S.D.N.Y.), while not a class action, raises questions about liability when the user's gambling addiction predates his use of a particular company's sports betting app. The criminal issues in Patel also color the liability issue, where the plaintiff's incarceration for embezzlement is the source of the emotional distress damages sought against the sports betting company. However, the plaintiff's opposition briefing[10] lashes out at the defendant, accusing the sports betting company of maligning him for his addiction. Whether or not that is a fair description of the company's efforts to defend itself, it is a reminder of changing attitudes toward those who suffer with addiction, optics that sports betting companies may wish to consider in their response to a lawsuit.
Venable continues to monitor the status of other sports betting class action lawsuits as they emerge and progress.
Early Thoughts on the Trajectory of Sports Betting Litigation
Although similarities can be drawn between these claims and decades of tobacco litigation, differences in the types of damages alleged cannot be ignored. Tobacco addiction is primarily physiological and causes concrete physical injuries from tobacco smoke. Gambling is a behavioral addiction, and it may be harder for a plaintiff to marshal expert testimony and facts to prove that a sports betting app both was responsible for the addiction and caused cognizable and compensable harm. For sports betting plaintiffs bringing negligence claims as part of their lawsuits, the economic loss doctrine may prevent recovery if the alleged losses are considered to arise from a contractual relationship with the defendants and are purely economic. For those plaintiffs seeking to add fraud claims to their lawsuits, the requirements of Rule 9(b) raise the pleading bar higher, as these claims "must state with particularity the circumstances constituting fraud or mistake."
There are opportunities for sports betting companies with experienced legal guidance to use pre-trial motions to force plaintiffs to meet pleading standards and potentially narrow the scope of or obtain dismissal on certain claims, and to utilize robust expert witness testimony on the causes and effects of gambling addiction to avoid liability.
[2] St. Bonaventure/Siena Research Survey Reveals Almost 1 in 5 Americans Have an Online Sports Betting Account, St. Bonaventure Uni. (Feb. 5, 2024) https://www.sbu.edu/news/news-items/2024/02/05/st.-bonaventure-siena-research-survey-reveals-almost-1-in-5-americans-have-an-online-sports-betting-account.
[3] See Youngs v. DraftKings Inc., et al., No. 2:25cv00179 (D.N.J., filed Jan. 7, 2025); Beyer, et al. v. DraftKings, Inc., et al., No. 2025L000261 (Ill. Cir. Ct., filed Jan. 8, 2025); Beyer, et al. v. DraftKings, Inc., et al., 1:25cv0006 (W.D. Ky., filed Jan. 7, 2025); De Leon, et al. v. DraftKings, Inc., et al., 1:25cv644 (S.D.N.Y., filed Jan. 22, 2025); Scanlon, et al. v. DraftKings, Inc., No. 2484cv01099 (Mass. Super. Ct., Filed Dec. 12, 2023); Patel v. Fan Duel, Inc., et al., 1:24cv7402 (S.D.N.Y., filed October 1, 2024).
[4] De Leon, et al. v. DraftKings, Inc., et al., 1:25cv644 (S.D.N.Y., filed Jan. 22, 2025).
[5] Patel v. Fan Duel, Inc., et al., 1:24cv7402 (S.D.N.Y., filed October 1, 2024).
[6] Scanlon, et al. v. DraftKings, Inc., No. 2484cv01099 (Mass. Super. Ct., Filed Dec. 12, 2023).
[7] Scanlon, Mem. of Decision & Order Def. Mot. Dismiss (Aug. 19, 2023) (denying Defendants' Motion to Dismiss).
[8] Id.
[9] Patel v. Fan Duel, Inc., et al., 1:24cv7402 (S.D.N.Y., filed October 1, 2024).
[10] Patel, Pl's Mem. Opp'n Def.'s Mot. Compel Arb., ECF 41 (S.D.N.Y., filed Feb. 28, 2025).