How Much Protection Do Online Sportsbooks Owe Their Patrons? | Defector

The state of New Jersey requires that online gambling operators notify gamblers when their lifetime deposits have crossed a certain dollar threshold. Small bets add up: A user might think they are wagering reasonably and not fully appreciate that over too short a period of time they’ve pumped a few paychecks or more into their account. So New Jersey regulations require that gambling operators freeze a user’s gambling activity until the user has been confronted with the option “to self-impose responsible gaming limits” or close their account, has once again been reminded of the existence of a problem-gambling hotline, and has clicked their way through an acknowledgment. The threshold is $2,500, which seems reasonable enough. Certainly I would want to know if I’d deposited more than two thousand of my own dollars into a DraftKings account, so that I could immediately hurl myself off of a skyscraper.

A DraftKings user in New Jersey with the handle MDallo1990 hit the $2,500 deposit threshold on or about Feb. 1, 2020, according to attorney Matthew Litt, who represents the user’s “separated spouse” and two children. MDallo had at that point been on DraftKings for about a month; though this would not have been his first encounter with the problem-gambling hotline number, this would’ve been the first time that the encounter came with a mandatory freeze on gambling, and a prompt. Unfortunately, MDallo did not immediately “self-impose responsible gaming limits” or close his account.

Even more unfortunately, the laws of the state of New Jersey do not require a gambling operator to impose any follow-up freezing, as a gambler’s deposits soar upward from that one modest threshold. MDallo continued to do lots and lots of wagering, and to deposit more and more money with DraftKings. According to a lawsuit filed by Litt’s clients last week, MDallo averaged about $2,000 of monthly deposits with DraftKings for the remainder of 2020, and then averaged more than $12,000 in monthly deposits in 2021, and then $44,000 per month in 2022. The following April, MDallo put more than $125,000 into his account. In 2023, MDallo’s monthly average for deposits reached above $65,000; according to the complaint, MDallo placed more than 14,000 sportsbook bets that year.

MDallo’s separated spouse, Lisa D’Alessandro, says that MDallo’s gambling far outstripped his earnings. For the years covered by the lawsuit, MDallo recorded approximately $175,000 in annual income. To fund his problem gambling, MDallo wiped out the family’s reserves, emptied out lines of credit, and pillaged various savings accounts, including accounts that his two children had opened to hold funds gained in “gifts from baptism, Christmas presents, and birthday presents.” In all, MDallo placed nearly $15 million in wagers over a four-year period, and recorded a loss of over $940,000.

As MDallo’s wagering spun wildly out of control, DraftKings was doing the opposite of flashing a little helpful warning on MDallo’s account, according to the suit. D’Alessandro’s complaint (embedded below) accuses DraftKings of “actively participating in the addiction of Mdallo1990 by targeting him with incentives, bonuses, and other gifts to create, nurture, expedite, and/or exacerbate his addiction.” The complaint says that DraftKings responded to MDallo’s obviously problematic pattern of behavior not by intervening but with enticements. MDallo was made a VIP and assigned “a series of VIP hosts,” who personally engaged with MDallo “on a near-daily basis” with offers of VIP goodies “including free bets, loss-back credits, gifts, trophies, and other incentives.” The lawsuit says that DraftKings had all the information it should’ve needed to know that MDallo’s gambling had become compulsive and destructive, and used that information to actively encourage more gambling. Because he was gambling beyond his means while having incentives waved in his face, naturally he hunted around for increasingly desperate sources of funding, which is how he wound up cleaning out his own children.

This isn’t a new kind of story, but the legalization of sports gambling and the advent of online and smartphone gambling have made it a more common one. The Athletic published a recent, grueling story about a man who succumbed to a bombardment of enticements and wound up losing $110,000 on FanDuel over a nightmarish 15-month spree. Litt, the lawyer representing D’Alessandro in her case against DraftKings, also represents Amit Patel in a lawsuit accusing FanDuel of encouraging his own addiction: Patel was sentenced to more than six years in prison in March after he pled guilty to charges related to the theft of $22 million from the Jacksonville Jaguars, which Patel used to fund reckless sports gambling.

Most cases of problem gambling will not be so extreme, for the simple reason that most people cannot get their hands onto hundreds of thousands of dollars. Researchers at SMU reported in July that low-income gamblers are more likely to fall into patterns of irresponsible wagering; the cohort of gamblers who spend more than 10 percent of their income on bets is composed disproportionately of people who are already economically squeezed. You do not need to be bombarded by VIP prizes to succumb to distorted thinking: Jordan Holt, the man from The Athletic story, fell into a desperate pattern of chasing his losses, throwing good money after bad. FanDuel’s app and streamlined process made it way too easy. “I looked at it like Monopoly money,” Holt told The Athletic. “I didn’t see it as real money. I couldn’t physically touch it, I couldn’t hold it.”

Lawsuits like D’Alessandro’s and Patel’s are seeking to impose some enforceable duty of care onto gambling operators. Right now, the DraftKings “patron protection” practices are feeble, and rely heavily on players recognizing their own danger and responding rationally. Players can suspend their own accounts, or opt into automated cool-off periods, or set their own limits on deposits or entries or fees. You might expect states where sports gambling has been legalized to have enacted significant legal protections, but only if you have suffered a recent head wound. New Jersey, which sued legalized sports gambling into existence when it took on PASPA in 2018, has a handful of rules that amount to making it illegal under some circumstances for mob enforcers to physically drag you into a sportsbook. Litt described them to Defector as “a joke.”

In June, New Jersey governor Phil Murphy announced the formation of a Responsible Gaming Task Force, with the mandate to help come up with reforms “to support responsible gaming and to address problem gambling” in the state. Problem gambling is on the rise in New Jersey, according to a study from Rutgers; a shocking but also possibly conservative six percent of state residents are considered “at high risk for problem gambling,” a cohort that includes a disproportionate number of black and hispanic people. They’ve tried splashing the hotline everywhere, and they’ve tried reminding people that they are technically allowed not to gamble; perhaps at some point in the future they might consider loading responsibilities onto the purveyors. “‘Responsible gaming’ is not merely a buzzword in New Jersey,” insists state attorney general Matt Platkin, in the announcement press release. He’s right: “Responsible gaming” is in fact two words, which together don’t amount to much more than buzz so long as the onus and consequences continue to fall entirely on the marks.