FanDuel, DraftKings To Pay $12M To Resolve False Advertising Allegations In New York

Daily fantasy sports companies DraftKings and FanDuel each agreed to pay $6 million to resolve New York’s claims that the companies engaged in false advertising. 

New York Attorney General Eric Schneiderman announced the settlements Tuesday, just two months after the state legalized online sports betting following the shutdown of the sites earlier in the year.

The settlement agreements impose the highest penalty New York has awarded for deceptive advertising in recent memory.

As part of the settlements, FanDuel [PDF] and DraftKings [PDF] have agreed to revamp their marketing to include clear disclosures of terms and conditions for marketing promotions, expected winnings, and expected performance in the online contests, as well as resources for players at risk for compulsive gaming disorders, including addiction.

The companies are also required to maintain a webpage that provides information about the rate of success of users in its contests, including the percentage of winnings captured by the top 1%, 5% and 10% of players.

Finally, the agreement requires the companies to acknowledge the findings of the AG offices’ year-long investigation, which concluded that both companies:
• misled consumers about the substantial advantages of high-volume and professional players
• gave false and misleading statistics in marketing and advertising about the likelihood of winning
• deceptively promised to match a player’s initiation despite in marketing promotions
• mischaracterized the betting games as “harmless fun” by failing to disclose the risk for compulsive gaming and addiction.

The settlement comes just two months after FanDuel and DraftKings were allowed to once again begin operations in New York following Governor Andrew Cuomo putting his name to a new law that explicitly legalized certain daily fantasy sports (DFS) contests within the Empire State.

The issues between the sites and New York began back in Nov. 2015 when Schneiderman’s office concluded that DraftKings and FanDuel constituted unlawful “contest of chance” as defined in state statutes, and directed the two sites to cease operating in the state.

A legal back-and-forth quickly ensued, with Schneiderman suing the two companies over not just the alleged gambling, but also accusations of false advertising. A state court first ordered the sites to temporarily stop operating in New York, only to immediately grant them a stay, allowing operations to continue.

The sites, of course, began a million-dollar lobbying effort in the state capital to pass or amend laws in order to protect the legality of DFS.

In March 2016, Schneiderman and the DFS sites reached a deal. They would cease operating in New York for a few months, giving the state legislature some time to listen to the lobbyists. The end result: a law was passed, Cuomo signed it, and the sites began operating again.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.