Gambling Lawsuits Take Aim at How Sportsbooks Keep Problem Gamblers Betting

Lawsuits seeking to hold online sportsbooks responsible for problem gambling have been on the rise. But those cases confront an obvious problem: gambling is legal, participation is voluntary, and losing money is a known and inherent risk of the activity. So when, if ever, can a sportsbook be held liable for a customer’s gambling losses?

Plaintiffs are attempting to answer that question by shifting the focus to the sportsbook’s practices. The emerging theory is not merely that sportsbooks know problem gamblers are using their platforms and fail to intervene. It is that they identify those gamblers and affirmatively target them with incentives designed to keep them betting.

A class action filed last week against DraftKings and FanDuel illustrates that shift. There, three Louisiana residents allege that the sportsbooks use customer data and artificial intelligence to identify users showing signs of problem gambling and then use personalized promotions and rewards to encourage those users to keep betting. The fundamental strategy is nothing new. In Casino, Ace Rothstein deployed a low- tech version of it against K.K. Ichikawa, deliberately keeping the high roller gambling until the house wins its money back. What has changed is the technology: plaintiffs now allege that sportsbooks can use artificial intelligence and customer data to pursue the same strategy automatically and at scale.

By focusing on this affirmative conduct, plaintiffs may be able to sidestep the central problem with traditional negligence claims: the duty, or lack thereof, of sportsbooks to protect their customers. Instead of arguing that a sportsbook failed to protect customers who chose to gamble, plaintiffs contend that sportsbooks knowingly identify, target, and induce customers with gambling problems to continue betting.

Whether courts will find that distinction meaningful remains to be seen.

Gambling companies will likely seek to push these claims into private arbitration. There, they may argue that they have no duty to protect their customers, that the gamblers’ own conduct caused their losses, and that they provide voluntary controls designed to address problem gambling.

Plaintiffs, meanwhile, may seek to analogize their claims to social-media addiction litigation. Their theory is straightforward: sportsbooks know that some of their best customers are problem gamblers, know that continued use of their product can be destructive for those customers, and nevertheless affirmatively encourage them to keep gambling.

The difficulty for plaintiffs is that even if they can prove that sportsbooks knowingly induce problem gamblers to continue betting, there is little established authority holding that such conduct gives rise to a common-law or consumer-protection claim.

The difficulty for sportsbooks is different. Gambling addiction is not going away and, if anything, is becoming more widespread. Neither are its consequences. As online sportsbooks become more sophisticated in identifying and targeting individual customers, challenges to those practices will likely continue through both private litigation and government action.

Jaszczuk P.C. will continue to monitor developments in this area.