By Stefanie Andrews

Online sports betting giants FanDuel and DraftKings settle a yearlong case regarding false advertising claims with the state of New York. FanDuel and DraftKings’ business model is based on allowing fans of major sports leagues to create fantasy teams.[1] The players win based on how well their fantasy teams perform throughout the season. Each player will choose real athletes and place them on their fantasy team for the season. Players win based on how well the individual athletes they choose perform during the season. The majority of players are first time users hoping to make a larger amount of money from an online fantasy team than what they would make just playing amongst friends. Although fantasy leagues have become popularized, the New York Attorney General claimed that FanDuel and Draftkings marketed big wins to new players under false information.

New York Attorney General Eric Schneiderman filed an injunction against FanDuel and Draftkings in November 2015. The claims alleged that the companies committed consumer fraud and false advertising. [2] The Attorney General based his false advertising claims on New York Executive Law § 63(12) and New York Business Corporate Law § 1303. [3] Based on investigations done by the Attorney General’s office, FanDuel and Draftkings’ advertisements led consumers to believe that all fantasy sports players had equal chances of winning. However, only a small number of professional players win the jackpot. [4] The Attorney General’s office also claimed that FanDuel used misleading testimonials that suggested anyone could win, without disclosing that the testimonials were often from professional players. [5]

In October 2016, both companies came to a settlement agreement with the Attorney General of New York. The settlement requires DraftKings and FanDuel to pay $6 million dollars each to the state of New York.[6]  FanDuel and DraftKings agreed to change the terms and conditions disclosed to players. Both companies must also disclose information about the actual winnings online. [7]

This agreement will change the practice of advertising with all online gambling companies. The gambling industry is a highly regulated industry. With online sports betting companies becoming increasingly popular it is important that consumers are not being tricked into participating. This industry thrives on consumers’ hope of big wins; however, they should not be able to legally deceive customers with false testimonies and statistics. Now that the state of New York made a strong stance against the two companies, it will cause other online betting sites to review their marketing policies.

FanDuel and DraftKings still face similar issues in various other states. The outcome of this case is insight on how the other states may begin enforcing measures to protect consumers. It is likely that there will be several other online fantasy sport betting sites developing after seeing the popularity of these two companies. The settlement between FanDuel, DraftKings, and the State of New York will set a precedent amongst this growing sector of the gambling industry. In effect, it will cause future and current companies to look carefully at their marketing policies to ensure that they are not falsely advertising to consumers.

[1] See, Dustin Gouker, If DraftKings andFanDuel Settle False Advertising Claims in New York, Could Other States Follow Suit?, Legal Sports Report (October 24, 2016), https://www.legalsportsreport.com/11887/draftkings-fanduel-settlement-new-york/.

[2] Id.

[3] Id.

[4] See, Lucinda Shen, DraftKings and FanDuel Settle New York Lawsuit for $12 million, Fortune (Oct. 26, 2016), https://fortune.com/2016/10/26/draftkings-fanduel-settlement/.

[5] See, Joel Stashenko, Fantasy Sports-Betting Companies Settle Suits with NY AG for $12 Million, Inside Counsel (October 27, 2016) https://www.insidecounsel.com/2016/10/27/fantasy-sports-betting-companies-settle-suits-with?ref=footer-news.

[6] See, Shen, supra note 4.

[7] See, David Klepper, DrafKings, FanDuel Agree to $12M Settlement with NY, U.S. News (Oct. 25, 2016), https://www.usnews.com/news/sports/articles/2016-10-25/draftkings-fanduel-agree-to-12m-settlement-with-ny.

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