The family of an alleged problem gambler has sued Boston-based bookmaker DraftKings after the patriarch lost $1 million on its sports betting platform.
Beyond His Means
A sports bettor at the popular sportsbook DraftKings whose username is “Mdallo1990” was allegedly enticed by the company’s VIP hosts to bet over his head, causing him to use funds from his wife’s bank accounts and credit cards while stealing money given to his children as gifts.
Lisa D’Alessandro, the wife of Mdallo1990, filed a suit earlier this week in the United States District Court for the District of New Jersey accusing DraftKings of negligence, fraud, and violations of the New Jersey Consumer Fraud Act. The suit alleges Mdallo1990 wagered $15 million over a four-year period and lost $942,232 that he pilfered from other sources, mainly his family.
Incentives from DraftKings
The suit claims that DraftKings encouraged Mdallo1990 to bet more by incentivizing him with bonuses, gifts, and an assortment of other inducements.
“To be clear, this suit does not allege liability on the basis that Defendants passively permitted a problem gambler to use its gambling platform,” the complaint argues. “Rather, this suit alleges violation of New Jersey statutory and common law because Defendants actively participated in the addiction of Mdallo1990 by targeting him with incentives, bonuses, and other gifts to create, nurture, expedite, and/or exacerbate his addiction.”
The lawsuit contends that DraftKings management should have had Mdallo1990 verify the source of his funds via a bank statement or W-2 form. That is required operating company procedure, but it was not employed in this instance. The suit contends the customer was betting more than four times his annual salary at one point.
Possible Anticompetitive Conduct
They say when it rains it pours, and at about the same time DraftKings was hit with this lawsuit, a letter entitled “Possible Anticompetitive Conduct” written by Utah Senator Mike Lee and Vermont Senator Peter Welch to the Department of Justice and Federal Trade Commission accused the duopoly of DraftKings and FanDuel of doing just that.
“We write to raise concerns regarding FanDuel’s and DraftKings’s conduct that may be violating Section 1 of the Sherman Act prohibition on coordination to obstruct or impair competition,” the senators wrote. “We urge you to look into these allegations to ensure that competition is protected and consumers continue to benefit from innovation and new offerings in sports entertainment.”
Market Dominance in Mobile Gaming
The two companies account for approximately 77% of the mobile gaming market in the United States due to an enormous head start they enjoyed as leaders in the daily fantasy sports (DFS) industry before sports betting was no longer prohibited throughout the United States.
Both FanDuel and DraftKings had millions of customers in their DFS databases, and they were easily convertible to sports bettors after the US Supreme Court overturned PASPA in 2018. Both companies also enjoyed nationwide brand name recognition after they launched blizzards of advertising campaigns when both were trying to outdo the other in the early days of DFS in the United States.
The bipartisan letter notes that both companies were blocked from merging in 2017 due to their domination of the DFS industry. The letter goes on to state that the two companies “expanded their dominance by leveraging their positions in fantasy sports to become online sports betting giants.”
The senators are asking the DOJ and FTC to investigate the issue and take whatever actions they deem appropriate.
