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Online Fantasy Sports Sites, FanDuel And DraftKings, Under Scrutiny Of Government
Photograph by Scott Olson — Getty Images

DraftKings and FanDuel Settle New York Lawsuit for $12 Million

Oct 26, 2016

"I'm just a regular guy, who goes to work everyday," says Chris Prince in a FanDuel infomercial. "Anybody can win. It's not just a game against professionals."

In this ad for FanDuel, a leader in fantasy sports contests, Prince failed to mention he was a professional daily fantasy sports contestant. He was also one of the mere 10% of players who actually won money while gaming, according to New York Attorney General Eric Schneiderman. So FanDuel, along with the other major fantasy sports provider DraftKings, were sued for false advertising.

On Tuesday, Schneiderman settled the case with both companies, ordering each to pay $6 million for releasing false advertisements. FanDuel and DraftKings also agreed to better disclose their terms and conditions, as well as their expected winnings in ads.

According to Schneiderman, FanDuel’s and DrafKings’ ads implied that all fantasy sports players, regardless of resources and experience, had the same chance of winning—and winning big. But in reality, just a small percentage of professional players with research, software, and large bankrolls won the majority of the jackpot.

For example, one DraftKings disclaimer cited by the attorney general's office stated that the "average user's winnings for the last 12 months [was] $1,263." But that figure failed to account for fees and losses. In fact, 89.3% of players actually lost money between 2013 and 2014, the office found.

The office accused FanDuel of similar schemes, and also said that FanDuel used misleading testimonials that suggested any old Joe could play to win. For example, one television advertisement featuring a player named Scott Hanson claimed that he was a personal trainer who turned “$2 into $2 million on FanDuel.” What the company failed to disclose was that Hanson worked professionally in the sports analytics industry.

"DraftKings and FanDuel will now be required to operate with greater transparency and disclosure and to permanently end the misrepresentations they made to millions of consumers," Schneiderman said in a statement. "These agreements will help ensure that both companies operate, honestly and lawfully in the future.”

Still, it's only a partial win for Schneiderman, who initially tried to ban DraftKings and FanDuel in New York back in November, saying the two games were considered illegal gambling. In August, New York Gov. Andrew Cuomo signed a bill that explicitly legalized daily fantasy sports betting.

The settlement comes as September broadcast ad sales fell 13% compared to the same month a year earlier because DraftKings and FanDuel pulled back from advertising, according to the Standard Media Index as first reported by AdWeek.

While DraftKings and FanDuel spent a combined $118 million last September, the two firms spent nearly $100 million less for the same month this year, according to MoffettNathanson.

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