Sportsbooks Paying You Back?

Photo Source: Abby Drey / adrey@centraldaily.com

Indiana and Penn State football provided a thrilling start to the Big Ten season, but not without a hugely controversial referee call along with it. With Indiana going for the 2 point conversion down 1 in overtime, Indiana’s quarterback Michael Penix, Jr. dove full extension to the pylon to try and win his team the game. On the field, the conversion was ruled good and after a lengthy review, the call stood because the referees said there was no indisputable video evidence. You can be the judge whether you think Penix, Jr. reached the ball to the pylon before his body hit the ground, but either way it was a devastating loss for Penn State fans and bettors.

But just when you think you lost the money you bet for good, DraftKings comes out and offers a refund on all moneyline (bets to win the game outright) bets on Penn State. This isn’t the first time sportsbooks offered refunds to bettors due to a controversial call or circumstance. Bears bettors were refunded by FanDuel when they lost on the infamous “Double Doink” in the playoffs. Saints bettors were refunded by PointsBet when the pass interference call that would have all but sealed the game for the Saints was not called. Bettors who bet on the New York Yankees to win the World Series were refunded by PointsBet after the Astros cheated.

These are not the only examples of such refunds and certainly won’t be the last. But why do sportsbooks engage in these kinds of refunds? The potential goodwill and lack of real cash paybacks.

Sportsbooks can afford to wear small losses so they attempt to gain more users by offering such as refunds on controversial plays. Just look at DraftKings, which brought in $71 million in revenue from April-June this year, a stretch with virtually no sports played. These sportsbooks can easily afford these few thousand dollar refunds in exchange for making bettors happy.

The sportsbooks aren’t even paying back straight cash either; they offer capped refunds in credits. All of those previously mentioned refunds come in the form of credits for future bets on the site, which is almost guaranteed to be cheaper than paying everyone out in cash. The credits give bettors another reason to come back to that sportsbook app and use their services. Joe Shea, head of digital sportsbook operations for DraftKings, also points out that DraftKings has a 90% retention rate, as they have become one of the top players in the online gambling market.

As some critics point out though, these kinds of practices can delegitimize sportsbooks in the eyes of avid bettors. As Jimmy Traina of Sports Illustrated wrote, “For starters, I’d never bet at a book that offers refunds because it makes me think they’re not a legit outlet. More importantly, though, the cherry picking of games for refunds is infuriating. The NCAA tournament or NFL playoffs are no more important than any other game in the betting world.” Even 64% of over 23,000 Twitter voters disagreed with the concept of giving bettors refunds. Others worry about the “slippery-slope” that is created by sportsbooks deciding on their own which controversies arise to the level of refunding bets.

The lack of enthusiasm for such a concept provides an opportunity for aggrieved bettors. The slippery slope created by sportsbooks deciding which games deserve to be paid out is where gamblers have a potential avenue to bring suit.

Whereas daily fantasy bettors failed in their effort to sue MLB for failing to disclose knowledge of the Astros’ cheating, actions against sportsbooks could be a possibility. The MLB suit struggled because as New York federal judge Jed Rakoff said, “the fantasy users could not point to a transaction between them and MLB or the teams, since they were competing in a contest offered by third parties.” “This absence of duty and reliance forecloses plaintiffs’ fraud and negligence claims, and the lack of a transaction, relationship, or other nexus forecloses plaintiffs’ consumer protection claims.”

Here, sports bettors would bring suit against the very sportsbooks which decided which games would be refunded. Bettors who believe a bet they made should be refunded could potentially bring claims that sportsbooks are arbitrary and capricious in deciding which games get refunded. Sportsbooks can more easily offer these refunds for games they do not handle a large amount of bets on both sides. But what happens to someone if there is a controversial call in the Super Bowl, where $6.8 billion was expected to be wagered this past February? That is where a potential suit could arise.

Sportsbooks defend their practice, though, and believe they are right in-line with industry standards. Joe Shea from DraftKings again went on to say that he sees it as the same exact concept as Vegas offering complementary rooms, meals, or loyalty points. They don’t believe they are doing anything out of the ordinary and would defend their practice in court.

It remains to be seen if someone would be willing to bring suit against the sportsbooks. The sportsbook practice of arbitrarily picking and choosing which games or events gets refunded seems to open up sportsbooks to potential liability. The free publicity could be worth the risk, but time will tell if it may catch up to them.