Hooked by the Algorithm: Are FanDuel and DraftKings Liable for Gambling Losses in Alabama?

Your phone buzzes. It is not a text from your spouse or an email from your boss. It is a push notification from an app you downloaded weeks ago, offering a free bonus just to log back in. You tell yourself you will only play the free credits. Three hours later, the credits are gone, and so is a significant portion of your paycheck.

This scenario is playing out across Mobile, Birmingham, and the entire state of Alabama. For many, what starts as casual entertainment on platforms like FanDuel and DraftKings spirals into a financial and emotional crisis. When the dust settles and the bank accounts are empty, a difficult question arises: Is this just bad luck, or were you the target of a sophisticated system designed to ensure you lose?

The Science of the Hook: Why You Can Not Just Stop

To determine legal liability, we must first analyze the mechanism of harm. Online gambling platforms and Daily Fantasy Sports (DFS) apps are not digital casinos; they are data-harvesting video games built on the same psychological principles as slot machines.

The core of this addiction is a concept known as variable ratio reinforcement. The app does not reward you every time you play, nor does it punish you every time. It provides wins on an unpredictable schedule. This uncertainty triggers a massive release of dopamine in the brain, creating a biological feedback loop that overrides rational decision-making.

These platforms employ teams of data scientists and behavioral psychologists to fine-tune this loop. They track your screen time, your click speed, and your loss threshold. When the algorithm detects you are about to quit, it may offer a bonus, a near-miss outcome, or a notification to pull you back in. In the eyes of the law, this moves the conversation from user choice to product design. If an app is specifically coded to exploit human biology and create compulsive behavior, it may be considered a defective product.

The Legal Status of DFS and Betting in Alabama

Navigating the laws in our state is complicated. Alabama has historically held strict prohibitions against most forms of gambling. However, in 2019, the state legislature passed the Fantasy Contests Act. This legislation legalized Daily Fantasy Sports contests, distinguishing them from games of chance by arguing they are based on the skill and knowledge of the participants.

This distinction is important for liability. While sports betting remains largely restricted, the DFS operators—often the same companies as the sportsbooks—are operating legally within the state. This legal presence means they are subject to Alabama civil laws regarding consumer protection, negligence, and product liability. Even if you were accessing a sports betting interface, the corporate entity behind it has duties to the consumer that it cannot ignore.

Liability Theory 1: Defective Product Design

A primary avenue for litigation involves Product Liability. In Alabama, a manufacturer can be held liable if they sell a product that is unreasonably dangerous to the user. Typically, we think of this regarding exploding tires or faulty medical devices, but the logic applies to software as well.

The argument here is that the app itself is the product, and it is defectively designed. If the software contains features solely intended to manufacture addiction—such as “near-miss” visualizations that make a loss look like a win, or speed-of-play mechanics that bypass cognitive control—the developer may be liable for the resulting harm.

These companies have a duty to design their products safely. If they know their algorithm causes a certain percentage of users to develop a gambling disorder and they fail to mitigate that risk, or worse, if they actively enhance those addictive features to maximize profit, they are placing a dangerous product into the stream of commerce.

Liability Theory 2: Predatory Negligence and VIP Schemes

Negligence occurs when a party breaches a duty of care, causing harm to another. The most egregious examples in the online gambling world involve “VIP” or “High Value” player programs.

When a user begins to lose large sums of money, a responsible company might intervene and suggest a cooling-off period. Instead, data reveals that many operators assign these users a personal VIP host. These hosts are incentivized to keep the “whale” betting. They may offer free credits, tickets to sporting events, or direct encouragement via text message exactly when the user attempts to stop.

This is not customer service; it is predatory retention. If a platform has data showing a user is displaying clear signs of financial distress or addiction, and they choose to accelerate their marketing efforts toward that individual, they may be found negligent. They are knowingly exploiting a vulnerable person for financial gain.

Liability Theory 3: Deceptive Trade Practices

The Alabama Deceptive Trade Practices Act protects consumers from misleading or false commercial conduct. Online wagering platforms frequently use language that disguises the true risk of their service.

Common tactics include:

• “Risk-Free” Bets: Marketing a wager as risk-free when, in reality, the refund is paid in site credits that must be wagered again, requiring the user to risk more money to unlock the “refund.”
• Misleading Odds: Presenting data or “expert picks” that skew the perceived probability of winning.
• Hidden Terms: Buried clauses that prevent the withdrawal of winnings until an impossible amount of money has been played through the system.

If you were induced to deposit money based on false promises or misleading terminology, you may have a claim for statutory damages under Alabama consumer protection laws.

The Alabama Trap: Contributory Negligence

We must address the most significant legal hurdle in our state: the doctrine of contributory negligence. As discussed in our other areas of practice, Alabama is one of the few states that follow this severe rule. It states that if you are found to be even one percent at fault for your injuries, you are barred from recovering any compensation.

Defense attorneys for FanDuel and DraftKings will lean heavily on this. They will argue that you chose to download the app, you chose to deposit the money, and you chose to place the bet. They will claim your free will constitutes at least one percent of the blame.

This is why these cases require a sophisticated legal strategy. To overcome the contributory negligence defense, we must demonstrate that the nature of the addiction and the manipulative design of the algorithm effectively removed your volition. If the product is designed to override the brain’s decision-making center, the user is no longer acting with free will. Additionally, we may argue that the company’s conduct was “wanton”—meaning they acted with reckless disregard for the safety of their users. In Alabama, contributory negligence is not a defense against wanton conduct.

Damages: Recovering More Than Just Money

When a lawsuit is filed, the goal is to make the plaintiff whole. In gambling loss cases, the damages are often extensive and fall into two categories:

• Economic Damages: This includes the actual money lost to the platform, bank fees, interest on credit cards taken out to fund the account, and lost wages if the addiction impacted your employment.
• Non-Economic Damages: The cost of gambling addiction goes beyond the bank account. You may be entitled to compensation for mental anguish, emotional distress, the destruction of family relationships (loss of consortium), and the psychological pain of the disorder.

In cases of particularly egregious conduct—such as a VIP host deliberately targeting a user who admitted they had a problem—punitive damages may also be available to punish the corporation and deter future misconduct.

Practical Steps to Protect Your Rights

If you or a loved one has lost significant assets on these platforms, taking the right steps immediately is vital for any potential legal claim.

• Stop Playing Immediately: This seems obvious, but it is the first requirement. You cannot mitigate damages while continuing to feed the machine. Use self-exclusion tools if necessary.
• Preserve All Evidence: Do not delete the app or your account history. Download your full transaction history, betting logs, and chat transcripts with support staff.
• Save Communications: Take screenshots of all emails, push notifications, and text messages from the platform, especially those offering bonuses or from VIP hosts.
• Do Not Sign Anything: You may be contacted by the company with a small settlement offer or a “refund” that requires you to sign a waiver. Do not sign it. These documents are designed to permanently close your right to sue.
• Seek Legal Counsel: The terms of service for these apps often include arbitration clauses and class-action waivers. You need an attorney who knows how to navigate these contractual traps.