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DraftKings, FanDuel Pay Up to Settle Accusations of Deceptive Practices

September 7, 2017

Massachusetts Attorney General Maura Healey announced a settlement on Thursday in which fantasy sports companies DraftKings and FanDuel will pay a combined $2.6 million to resolve a probe of what she called unfair and deceptive practices affecting consumers.

The probe predated her office’s adoption of regulations in 2016 aimed at governing daily fantasy sports, in which participants create fantasy teams based on real players and pay to compete in American football, baseball, basketball and hockey.

Each company will pay $1.3 million.

Healey’s office said the regulations were prompted after her office began investigating the business model of fantasy sports operators in 2015 and discovered that some participants in the contests were not adequately protected.

Healey’s probe led to regulations that among other things prohibited people under the age of 21 from playing paid fantasy sports games and placed restrictions on how the games were advertised and promoted.

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The rules also prohibited promotions of paid fantasy sports on high school and college campuses and barred professional athletes, agents and others connected to pro sports from taking part in paid fantasy contests related to their sports.

“I am glad to have reached these settlements to address various consumer issues that existed at the early stages of this new industry,” Healey said in a statement.

DraftKings general counsel Tim Parilla said in a statement it was pleased to have reached a settlement and conclude what had been a “productive and collaborative process” with Healey’s office.

FanDuel likewise said it had worked closely with Healey during her office’s review of fantasy sports.

Modern fantasy sports started in 1980 and have exploded online.

Daily fantasy sports, a faster version of the season-long game, have developed over the past decade into a multibillion-dollar industry. Participants draft teams for a single game, enabling fans to spend money on contests more frequently.

In July, DraftKings and FanDuel scrapped a plan to merge following a lawsuit challenging the proposed deal by the U.S. Federal Trade Commission.

The FTC’s lawsuit was just the latest setback for the two companies, which have faced regulatory challenges in several states and scrutiny by officials who debated whether the paid daily games amounted to gambling.