DraftKings Faces Major Legal Challenges in 2025

DraftKings, a major force in online sports betting and daily fantasy sports, faces multiple high-profile lawsuits in 2025. These legal challenges threaten not only its finances but also its business model, with potential ripple effects across the online gambling industry. Allegations range from predatory marketing and exploiting addiction to securities violations and disputed payouts.

Since the U.S. Supreme Court’s 2018 decision to allow states to legalize sports betting, DraftKings has grown into a multi-billion-dollar powerhouse. Its rapid expansion has been fueled by aggressive marketing, celebrity endorsements, and promotions like so-called risk-free bets. But as the industry has exploded, so have concerns about its impact, prompting increased scrutiny from regulators and consumer advocates.

Background and Industry Context

By 2024, online gambling revenue in the U.S. had surpassed $100 billion. DraftKings, which began in 2012 as a daily fantasy sports platform, transitioned into full-service sports betting after the 2018 Murphy v. NCAA ruling struck down the federal ban. Over 30 states have since legalized sports betting, creating a massive market.

DraftKings went public in 2020 via a SPAC merger valued at over $6 billion. By 2025, it, along with FanDuel and BetMGM, dominated the industry. However, the patchwork of state regulations—some strict, others lenient—has made consistent enforcement of consumer protections challenging.

In 2025, multiple class-action suits were filed across several states. One of the most notable was lodged in Pennsylvania by Loevy + Loevy, alleging that DraftKings deliberately targeted problem gamblers, including those on self-exclusion lists, with promotional materials to lure them back to betting.

The Million-Dollar Addiction Case

Additional lawsuits in New York, Illinois, Kentucky, and New Jersey accuse DraftKings of exploiting gambling addiction through VIP programs and targeted marketing. Plaintiffs include individuals claiming devastating losses—sometimes entire life savings—encouraged by company incentives.

A high-profile New Jersey case alleges that a man lost nearly $1 million after VIP hosts continued offering bonuses and free bets despite clear signs of addiction. Plaintiffs argue these practices violate state consumer protection laws and responsible gambling regulations, potentially setting a legal precedent for the duty of care owed by betting platforms.

In New York, another case centers on a disputed $14 million payout, with the plaintiff alleging DraftKings arbitrarily voided winning bets. The dispute raises broader questions about fairness and transparency in online betting terms of service.

NFT Securities Settlement

In May 2025, DraftKings agreed to a $10 million settlement in a class-action lawsuit over its NFTs, which plaintiffs argued were unregistered securities. The settlement, pending court approval, could shape how courts treat digital collectibles in the future.

Real-World Impact

These cases spotlight the potential harms of mobile betting’s constant accessibility. The National Council on Problem Gambling reported a 45% increase in helpline calls for gambling addiction between 2018 and 2024. Critics point to features like instant deposits, push notifications, and complex bet options as triggers for vulnerable users.

Market reaction has been swift—DraftKings’ stock has fluctuated with each major legal development. Analysts estimate total liabilities could exceed $500 million if the company loses key cases. Some predict these lawsuits could force industry-wide changes, including stricter self-exclusion enforcement, mandatory deposit limits, and enhanced player verification.

Gambling policy experts argue these measures should have been standard from the outset. Several states, including California, Massachusetts, and Ohio, are now considering laws that would mandate more robust protections for problem gamblers.

Looking Ahead

The outcome of DraftKings’ legal battles could redefine how the online gambling industry operates in the U.S. If courts rule that betting operators must proactively identify and restrict problem gamblers, customer acquisition strategies may shift dramatically. As lawmakers balance tax revenues with public health concerns, operators will need to demonstrate a commitment to fairness and harm reduction.

For investors, regulators, and consumers, the coming months will reveal whether the rapid rise of legalized sports betting can be tempered with safeguards strong enough to protect players while keeping the industry viable.