By: Caitlin Gallagher
Volume IX – Issue II – Spring 2024
I. Introduction and Background
If you are an avid sports fan or even just a casual enjoyer of watching games, odds are you have been exposed to an ad for sports betting. Through online sports betting companies like DraftKings and FanDuel, users can create multi-leg bets on multiple aspects of a game (this is called a parlay), place micro-bets as games are happening live, bet on the outcome of the game itself, and bet on “pools,” which is betting on multiple outcomes against competitors. [1[. Harry Levant, a former gambling addict turned addiction therapist, says that sports betting has created a glaring public health crisis. [2] In a CBS 60 Minutes interview, Joe Ruscillo, another former gambling addict, exposes this crisis with his own story, recalling how his addiction began in high school when he began putting his weekly paychecks directly into whatever sports betting app he was using. He would set alarms in the middle of the night to bet on international matches, as he “would place a bet on anything, anytime, anywhere.” [3] He now only owns a flip phone in order to avoid any temptation to redownload the apps that controlled his adolescence. Ruscillo’s comments point to one of the biggest problems with online sports betting - the twenty-four hour a day availability of bets on everything, including sports matches that he never would have cared about otherwise.
Proponents of online gambling may say that Joe Ruscillo is an outlier in terms of gambling habits, but statistics would say otherwise. According to a Siena Research poll, about one in five Americans has an account with a betting app like DraftKings, and of those users, “37% have felt bad or ashamed after losing a bet, 38% have felt that they bet more than they should have, 19% have lied to someone about the extent of their betting, and 18% have bet and lost money that was meant for meeting their financial obligations.” [4] Given these alarming statistics, there is no question that the rise of betting apps like DraftKings puts users at risk of developing gambling addictions. The industry has been largely unregulated since its legalization in 2018, but this may change following the recent filing of a class-action lawsuit in Massachusetts against DraftKings. The new suit bears a striking resemblance to the infamous big tobacco class-action lawsuits in the 1980s, as it invokes similar arguments of deceitful advertising of a product with knowledge of its addictiveness. The expansion of online gambling has wreaked havoc on the health of the American public, but the Scanlan et al. v. DraftKings lawsuit has the potential to impose regulations on the online sports betting industry in the same way that cigarettes became more heavily regulated in the years following the big tobacco lawsuits. In this paper, I will begin by discussing the history of sports gambling cases in the US, then I will explain how the case made against Big Tobacco in the 1980s is similar to the case being made against DraftKings and how a court ruling like the one in Big Tobacco could trigger the end of widespread online sports gambling.
II. History: The Influence of Murphy v. NCAA
The rise of sports gambling addictions began with a Supreme Court ruling in 2018. In Murphy v. NCAA, the court evaluated the constitutionality of the Professional and Amateur Sports Protection Act (PASPA), which had been passed by Congress in 1992. PASPA makes it unlawful for “(1) a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or (2) a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.” [5]
In 2011, the first challenge to PASPA came in the form of a referendum. That year, the New Jersey legislature asked voters in a referendum whether they believed sports gambling should be permitted in their state. The majority of voters believed that it should be legalized in the state, and the state enacted the Sports Wagering Act in 2012. This act “would allow licensed casinos in Atlantic City and racetracks in this State to conduct wagering on professional and collegiate sport or athletic events.” [6] When it was sued by five different sports leagues, the state argued that PASPA was unconstitutional under the 10th Amendment of the Constitution. The 10th Amendment states that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” [7] New Jersey felt that Congress had overstepped its power when it imposed this regulation, rather than leaving it up to state legislatures to individually decide whether they would permit sports gambling or not.
In a 6-3 opinion, the Supreme Court sided with the State of New Jersey and found that PASPA was in fact unconstitutional under the 10th Amendment. They explained that “Congress may not simply “commandeer the legislative process of the States by directly compelling them to enact and enforce a federal regulatory program.” [8] Since PASPA created specific mandates on what a state could and could not do when it came to sports gambling, it was deemed “impermissively commandeering.” [9] With PASPA effectively repealed by this court decision, states were at their individual liberty to green-light sports betting. According to the American Gaming Association, thirty-eight states and Washington, D.C. have now legalized sports betting, as opposed to just one state before the Supreme Court decision in 2018. [10] Online sports betting was quick to follow, as DraftKings Daily Fantasy Sports is now legal in forty-four states, [11] when it was only legal in two states just six years ago. The exponential growth of the platform is a direct result of the Supreme Court ruling in 2018, and has left many Americans scrambling to face the consequences of more readily available gambling.
III. The Fall of Big Tobacco
To understand the current litigation against DraftKings, we must first understand the movement against big tobacco that began in the 1980s. According to the American Lung Association, cigarette smoking rates have decreased by 59% since 1980 among adults. [12] This decrease is largely due to the increased regulations on the tobacco industry, which has made people more aware of the addictive nature of cigarettes and the health risks associated with smoking. For many people alive today, it is hard to imagine a tobacco industry that exists without regulations. Misleading advertisements featuring cheery cigarette mascots like the Marlboro Man and Joe Camel are largely things of the past thanks to the success of lawsuits against tobacco companies. Younger generations are far more familiar with unnerving advertisements like the CDC’s “Tips From Former Smokers” campaign that feature former smokers and their frightening health complications. [13] Without the lawsuits in the 1980s, it is likely that cigarette companies could still promote smoking cigarettes as a fun and cool thing to do, despite knowing about the addictive nature of the product they sell and the harm that smoking will have on their customers’ health.
The success of the big tobacco litigation is due in part to the work of Richard Daynard. Daynard, chair of the Tobacco Products Liability Group, a group affiliated with the Public Health Advocacy Institute at Northeastern University, played a role in the Cipollone v. Liggett Group, Inc. case, which is famously the first case where a court had ever decided in favor of the plaintiff in a suit against a tobacco company. Rose Cipollone, the plaintiff in this case, had smoked for forty-two years before dying of a smoking-related illness in 1984. However, a year before her death, she sued three cigarette manufacturers because she believed they had not adequately warned her about the health complications that are caused by smoking. In 1988, the court sided with Cipollone and reasoned that the cigarette companies should be held responsible for her death. In their decision, the court explained that the cigarette companies had intentionally downplayed the hazardous effects of smoking by “associating cigarette smoking with such positive attributes as contentment, glamour, romance, youth, happiness . . . at the same time suggesting that smoking is an activity at least consistent with physical health and well being.” [14] The court also reasoned that the tobacco companies had knowledge of the true dangers of smoking, but intentionally conspired to keep that information from consumers so as to keep them addicted to and buying their products. [15] Once this case had been decided, many more tobacco cases were decided in favor of the plaintiffs rather than the tobacco industry. Credited by many as the mastermind behind the legal principles that allowed these cases to be resolved, it is accepted that Daynard’s work on these cases is part of the reason why the prevalence of smoking in society has decreased since the 1980s. However, Daynard’s work did not stop with tobacco companies, his focus is now on online sports betting companies, which he argues bear an uncanny resemblance to the malevolent and unregulated tobacco industry of the 1980s.
IV. The Case Against DraftKings: Deceit and Addiction
After PASPA was deemed unconstitutional, the lack of regulations turned sports betting, and especially online sports betting, into a virtually lawless sector of the sporting world. Although DraftKings and FanDuel have been the targets of lawsuits in the past, notably one in 2015 that exposed the unfair advantage that employees from each company had when they would place bets on the other company’s app, [16] there has been little progress in changing the way companies are allowed to advertise their addictive products. This was until the recent Scanlon et al. v. DraftKings lawsuit filed by the Northeastern University School of Law’s Public Health Advocacy Institute (PHAI) on behalf of Massachusetts plaintiffs Shane Harris and Melissa Scanlon. Like the cases against big tobacco, this lawsuit is being led by Richard Daynard, who seeks to mitigate the scarily familiar public health crisis that is being caused by online sports gambling. In this case, both plaintiffs signed up for a DraftKings promotion that promised them a $1,000 sign-up bonus when they deposited five dollars, [17] and when neither Harris nor Scanlon walked away with that money, they became confused. In this suit, the class alleges that they “were not aware that, in order to qualify for the sign-up bonus of $1,000, new customers were required to make an initial deposit of $5,000. After that, they had to gamble $25,000 on certain qualifying bets over a finite period. If they did all of that, they would qualify to receive non-withdrawable credits to use on the platform.” [18] To receive the promised bonus, the class would have had to put down a $5,000 deposit and place $25,000 in bets with odds of -300 or longer over 90 days, which is an average of $276 a day. [19] Under these fine-print conditions, the class-action suit alleges that users are statistically likely to lose money if they choose to sign up for this promotion. They also argue that it is not reasonable to expect users of the app to understand the nuance of the sign-up bonus, thus trapping them into continuing their use of the app.
In addition to the deceptive advertising, the suit also addresses the addictive nature of DraftKings’ gambling platform. Although the plaintiffs do not claim to have developed gambling addictions as a result of becoming users of DraftKings, the suit alleges that DraftKings has engaged in “a particularly unfair business practice because of the addictive nature of the underlying product they offer.” [20] They point to the fact that the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders (DSM-5) and the World Health Organization treat gambling addictions as being just as severe as an addiction to heroin, cocaine, and tobacco. In the suit, they write, “Marketers of a known addictive product should take special precautions to minimize addiction risk, and not require $25,000 of gambling to qualify for a promotional offer to new customers who are likely to be gambling-naive.”
V. Comparing to the Past and Looking to the Present
In analyzing the cases against Big Tobacco in comparison to this initial DraftKings suit, the similarities are jarring. Although there does not yet seem to be evidence of a conspiracy within these companies to hide information about gambling addiction from the public, there is more than enough evidence to prove that gambling has the potential to be a life-ruining addiction. What is most similar about DraftKings and tobacco companies like Liggett Groups is their intent to mislead consumers into believing that gambling is a fun pastime with no consequences. They may argue that their inclusion of a 1-800 gambling addiction hotline is enough warning to consumers about the dangers of online gambling, but it is clear from cases like Joe Ruscillo that the small effort has not been enough. When the court decided in Rose Cipollone’s case that the tobacco companies could be held accountable for her death, it triggered a domino effect of cases that held tobacco companies accountable. This Massachusetts civil case against DraftKings has the potential to do the same if the court finds that DraftKings intentionally led naive gamblers to lose money with their promotions, even with the knowledge that it could create a harmful addiction. If that is the case, future generations will look back on current online sports betting ads and scoff when they see the celebrity sponsorships and promises of wealth in the same way that young people look back in shock at cigarette advertisements that seem to entirely ignore the danger of the product they sell. This case represents a critical turning point in the sporting world. Just like with the tobacco industry, a combination of litigation and regulation is necessary to safeguard the well-being of the American public.
Endnotes
[1] DraftKings. 2024. “DraftKings Sportsbook.” DraftKings | Daily Fantasy Sports and Sportsbook. https://www.draftkings.com.
[2] Thomsen, Ian. 2023. “From convicted gambler to devoted advocate: Harry Levant's journey to save others.” Northeastern Global News. https://news.northeastern.edu/2023/09/18/magazine/gambling-addiction-advocate/
[3] CBS 60 Minutes, dir. 2024. 60 Minutes. Season 56, episode 18, “The Mismatch.” CBS. Aired February 02, 2024
[4] St. Bonaventure University & Siena Research. 2024. “St. Bonaventure/Siena Research survey reveals almost 1 in 5 Americans have an online sports betting account.” St. Bonaventure University. 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.
[5] 28 U.S. Code §3702 - Unlawful Sport Gambling. Legal Information Institute, https://www.law.cornell.edu/uscode/text/28/part-VI/chapter-178
[6] New Jersey Senate, Senate Bill 3113, 214th Legislature (2010), introduced, https://pub.njleg.gov/bills/2010/S3500/3113_I1.PDF
[7] U.S. Const.amend. X
[8] Murphy v. NCAA, 584 U.S. (2018). https://www.supremecourt.gov/opinions/17pdf/16-476_dbfi.pdf
[9] Ibid.
[10] American Gaming Association. 2024. “Interactive U.S. Map: Sports Betting.” American Gaming Association. https://www.americangaming.org/research/state-gaming-map/.
[11] DraftKings. 2024. “Where is DraftKings Fantasy Sports Legal?” DraftKings. https://www.draftkings.com/where-is-draftkings-legal.
[12] American Lung Association. 2024. “Tobacco Trends Brief.” American Lung Association. https://www.lung.org/research/trends-in-lung-disease/tobacco-trends-brief/overall-tobacco-trends.
[13] Centers for Disease Control and Prevention. 2024. “Real Stories | Real Stories | Tips From Former Smokers | CDC.” Centers for Disease Control and Prevention. https://www.cdc.gov/tobacco/campaign/tips/stories/index.html.
[14] Cipollone v. Liggett Group, 505 U.S. 504 (1992). https://www.law.cornell.edu/supct/html/90-1038.ZO.html
[15] Ibid.
[16] Rovell, Darren. 2015. “Class action lawsuit filed against DraftKings and FanDuel.” ESPN - Sports Betting. https://www.espn.com/sports-betting/story/_/id/13840184/class-action-lawsuit-accuses-draftkings-fanduel-negligence-fraud-false-advertising.
[17] DraftKings. n.d. “Official DraftKings Promo Codes for March 2024.” DraftKings. Accessed March 20, 2024. https://www.draftkings.com/promo-code.
[18] Gottlieb, Mark. 2023. “Public Health Advocacy Institute Files Class Action Against DraftKings in Massachusetts – Public Health Advocacy Institute.” Public Health Advocacy Institute. https://www.phaionline.org/2023/12/08/public-health-advocacy-institute-files-class-action-against-draftkings-in-massachusetts/.
[19] Pressman, Aaron. 2023. “Targeting online gambling, Northeastern lawyer who fought Big Tobacco sues DraftKings.” The Boston Globe (Boston), December 8, 2023. https://www.bostonglobe.com/2023/12/08/business/draftkings-northeastern-online-gambling-tobacco/.
[20] Scanlon et al. v. DraftKings (2023). https://www.classaction.org/media/scanlon-et-al-v-draftkings-inc.pdf