Antitrust Law Daily Wrap Up, ADVERTISING—S.D.N.Y.: Court dismisses online gamblers’ various claims against DraftKings, (Dec 15, 2025)

By Justin Marcus Smith, J.D.

The court paradoxically dismissed some claims because the consumers were too specific and failed to plausibly allege that VIP Hosts directed such conduct at consumers at large.

Consumers failed to plead viable New York General Business Law and various other gross negligence, breach of fiduciary duty, and products liability claims against online sports gambling service provider DraftKings, Inc. (DraftKings). The context did not show that DraftKings advertisements would have been misleading to reasonable consumers. Fraudulent misrepresentation claims did not satisfy heightened pleading under Fed. R. Civ. P. 9(b). Unjust enrichment claims were duplicative of dismissed claims. The consumers did not have the required physical injury to pursue products liability claims. The claims pertinent to VIP Hosts, which allegedly urged vulnerable gamblers to keep gambling, were paradoxically too specific to have general application. Gross negligence did not pertain, again, for lack of personal injury and lack of duty. Fiduciary duty did not pertain because the parties had only an arms’ length relationship. The court noted creating some form of duty would have contradicted the decision of the New York legislature to legalize online gambling. The court dismissed the first amended complaint (FAC) without discussing potential amendment. The dismissal of the complaint tracked a recent dismissal in the Eastern District of New York, but it contrasted with a Northern District of Illinois decision to allow a pleading about DraftKings advertising under Illinois law (De Leon v. DraftKings, Inc., No. 1:25-cv-00644-DLC (S.D.N.Y. Dec. 11, 2025)).

Background. New York State legalized online sports gambling in January 2022. Three New York consumers and one New Jersey consumer filed a putative class action against DraftKings, a popular sports gambling platform, and Crown NY Gaming Inc. (collectively, DraftKings). Crown NY Gaming, a subsidiary of DraftKings, Inc., is the licensed mobile sports wagering operator with the New York State Gaming Commission for the DraftKings’ sportsbook.

The consumers alleged DraftKings damaged them through misrepresentations and deceptive practices. Three said they became addicted to online gambling and suffered financial and emotional harm from using the DraftKings app to gamble on sports.

The FAC alleged three promotional activities violated the consumers’ rights: (1) advertisements of “No Sweat” bets involving an impractically small hyperlink to terms of service; (2) an allegedly misleading $1,000 deposit bonus offer inasmuch as it was subject to a 20% match of a user’s deposit; (2) use of VIP Hosts to urge users of the app to keep gambling, even after losing large sums of money.

Two of the four consumers filed the complaint in January 2025. DraftKings filed a motion to dismiss on April 8. All four consumers filed the FAC asserting fifteen claims on May 16, and DraftKings renewed its motion to dismiss the FAC in June.

The consumers asserted two New York General Business Law (GBL) § 349 claims and two GBL § 350 claims on behalf of the “No Sweat” and Deposit Match Promotion classes; intentional misrepresentation claims for the “No Sweat” and Deposit Match Promotion classes; three claims for the VIP Host Targeted class asserting gross negligence, a violation of GBL §§ 349 and 350, and a breach fiduciary duty. There were also unjust enrichment claims on behalf of all classes and strict liability and negligence products liability claims for design defect and failure to warn.

DraftKings attached copies of the 2022 and 2023 versions of the terms and conditions of the $1,000 deposit bonus promotion to their motion to dismiss. The terms were integral to the FAC. The FAC characterized the terms as illegibly small, confusingly worded, and inconspicuously displayed.

Reasonable consumer. The court held it must dismiss each of the four claims under the GBL §§ 349 and 350 tied to advertisements of the “No Sweat” bet and $1,000 Bonus promotions. First, the consumers did not identify in the FAC which advertisement they relied on. Second, they did not plausibly plead that the advertisements were misleading.

The court noted how the New York Court of Appeals has repeatedly observed that context is crucial in assessing whether advertisements are misleading. Courts can determine an advertisement was misleading under the GBL as a matter of law. A defendant’s actions are not cognizable under the GBL if the defendant discloses the very practices alleged to be deceptive.

The court found the FAC did not identify any advertisement that induced reliance. The FAC alleged all of the advertisements were materially similar, but that was not enough to assert that an advertisement violated the GBL because it was misleading.

The FAC also did not plausibly assert that the advertisements were misleading in their context. The court found DraftKings facially fully disclosed the complete terms of each promotion to the users of the app, and the FAC did not assert that those disclosures were misleading. The FAC failed to plead that the promotion advertisements, “short-hand” descriptions of the promotions, were misleading or deceptive.

The consumers essentially complained that the advertisements were misleading because they did not include the full terms of the promotions, and they argued small print disclosures did not defeat their claims. They relied on a case that held a reasonable consumer would not be expected to consult a nutrition label, but the court found the case inapposite. The instant product was on an app, and the consumers did not assert that anything in the app was misleading. The DraftKings app made the terms of the promotions readily available on the app itself. The court said a reasonable consumer would look at the readily accessible terms of a promotion before accessing the promotion.

The consumers’ argument about small font size fared no better because the FAC did not allege the promotion terms were in an unusually small font for a phone app or that the font size could not be expanded.

Last here, the consumers pleaded, in a conclusory way, that most users never saw the full terms of the promotion. A GBL claim must involve an allegation that deceptive conduct was likely to mislead a reasonable consumer in the context, but the FAC did not allege that the terms were misleading, hidden, or unavailable before users would join the promotion. DraftKings provided a hyperlink to the terms.

An Eastern District of New York court reached a similar conclusion about DraftKings and the reasonable consumer standard earlier this year (Aminov v. DraftKings, Inc., No. 1:24-cv-08472-MKB-LKE (E.D.N.Y. July 28, 2025)). However, earlier this month, a Northern District of Illinois court reached a very different conclusion. That court declined to dismiss consumers claims that DraftKings promotions violated Illinois false advertising law (Beyer v. DraftKings, Inc., No. 25-CV-1336 (N.D. Ill. Nov. 25, 2025)).

Intentional misrepresentation. The fraudulent misrepresentation claims could not survive because they did not satisfy R. 9(b). The failure of the FAC to identify the specific, putatively fraudulent language of the advertisement was fatal. Context and scienter were also lacking.

Unjust enrichment. The court ruled DraftKings was correct that the unjust enrichment claims were duplicative of the dismissed claims. In opposition to dismissal, the consumers asserted that the unjust enrichment claims did not depend on deceptive conduct, but that argument failed because the FAC did not identify separate conduct and did not seek distinct damages.

Products liability. The court dismissed the strict liability and negligence claims for design defect and failure to warn. The New York Court of Appeals has held that plaintiffs must sustain physical harm to have a tort. The consumers agreed products liability law would not apply to expressive conduct in the app or advertisements for promotions on the app. Three of the consumers argued the design of the app, including escalating default wagers and push notifications, was addictive and caused financial loss and emotional distress. The New Jersey consumer said he became severely addicted, suicidal, and lost his home and family. The consumers said DraftKings failed to warn.

DraftKings urged the consumers had asserted a novel product liability theory inasmuch as the app is not a physical product. In any event, the court found the consumers failed to plead physical injury. The consumers did not contest this deficiency, but they argued psychological and emotional suffering should suffice. The court said they did not provide any legal authority that mental illness and distress could perfect the pleading of a products liability claim. Under New York tort law, recovery for emotional suffering without physical injury applies only in three narrow circumstances not present here. The Beyer court, in contrast, determined the DraftKings app interface qualified as a “product” under Illinois products liability law (see Advertising, Dec. 2, 2025).

VIP Hosts. None of the other GBL violation, gross negligence, and breach of fiduciary duty claims survived dismissal. The court said the FAC alleged VIP Hosts engaged in manipulative and destructive behavior toward two of the consumers, but it failed to plausibly allege that VIP Hosts directed such conduct at consumers at large or similarly -situated consumers. The consumers’ conclusory attempt to argue the VIP Hosts statements were substantially uniform did not save the claims. Detailed allegations of the complaint contradicted uniformity.

Gross negligence. The court held the FAC failed to plead a gross negligence claim based on VIP Hosts because, again, it did not allege personal injury, only financial losses, damage to relationships, addiction treatment costs, and emotional damages. It also failed to plead that DraftKings owed a duty to the consumers that VIP Hosts breached.

The consumers repeated arguments made in defense of the products liability claims that the court already rejected. A case the consumers cited limited duty to those who suffered personal injury or property damage. The consumers disclaimed any request to find a “freestanding duty to identify addicted gamblers and protect them from themselves.” Instead, they argued DraftKings’ “deploy[ment]” of VIP Hosts created a duty to act with reasonable care to protect consumers susceptible to gambling addiction, or else it created a special relationship with app users. The consumers attempted to distinguish DraftKings as a “new kind” of gambling proprietor from casinos that do not owe a duty to consumers susceptible to gambling addiction.

The court said the consumers could not alter or supplement the FAC through motion briefing, and their theory failed anyway. New York courts have been hesitant to create a duty of care premised on failure to control the conduct of others. At bottom, the consumers did not show DraftKings had a duty to look out for or dissuade vulnerable gamblers. Creating a duty like that would have contradicted the New York State legislature’s decision to legalize online gambling.

Fiduciary duty. The court held the parties did not have a relationship of trust for a fiduciary duty to attach. The FAC only alleged an arm’s length commercial relationship offering promotions and site credits. It did not plead that VIP Hosts could control the plaintiffs or place bets on their behalf.

The consumers relied on a VIP Hosts job description that stated VIP Hosts “[c]reate strong, authentic, and trusted player relationships.” However, the court held that did not create a fiduciary relationship under New York law. It described an ordinary customer service relationship.

Last, a prior DraftKings case did not assist their argument. See Jacobs v. DraftKings, Inc., 2025 WL 746012, at *6 (E.D.N.Y. Mar. 7, 2025). The Jacobs plaintiff alleged a DraftKings employee broke a DraftKings promise to keep his personal information secure.

The Case is No. 1:25-cv-00644-DLC.

Judge: Cote, D.

Attorneys: Aaron Michael Tucek (Loevy & Loevy) for Clara De Leon. Alan Schoenfeld (Wilmer Cutler Pickering Hale and Dorr LLP) for DraftKings, Inc.

Companies: DraftKings, Inc.

Cases: Advertising StateUnfairTradePractices NewYorkNews