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DraftKings, FanDuel Settle NY False Advertising Lawsuit

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By Christopher Coble, Esq. on October 27, 2016 3:57 PM

Less than a year after Attorney General Eric Schneiderman told daily fantasy sites DraftKings and FanDuel he wanted New Yorkers' losing bets back, and less than six months after the state legislature approved a bill that would legalize and regulate daily fantasy sites, the state of New York and the two major daily fantasy players have settled a lawsuit for $12 million.

But this lawsuit wasn't about violations of the Empire State's gambling and gaming laws -- it was about misleading ads DraftKings and FanDuel were running.

It Doesn't Ad Up

The lawsuit alleged that advertisements from DraftKings and FanDuel gave consumers the impression that they had the same shot at winning big, regardless of their resources or experience. In fact, the companies were using professional players in their ads, the 10 percent of players with the research, software, and money to take home almost all winnings.

Schneiderman claims the sites:

Misled casual and novice players about the substantial advantages of high-volume and professional players ... Gave false and misleading statistics in marketing and advertising about the likelihood that players will win cash prizes ... Deceptively promised to match a player's initial deposit in marketing promotions ... [and] Marketed its contests as harmless fun, while failing to disclose the danger to populations at risk for compulsive gaming and addiction or provide responsible safeguards.

Pros and Cons

In addition to $6 million from DraftKings and FanDuel each, the settlement also requires daily fantasy sites to provide clear disclosure of terms and conditions for marketing promotions, expected winnings, and expected performance in the online contests.

On top of that, they must also provide resources for players at risk for compulsive gaming disorders, including gambling addiction. And in response to those pro players "using automated computer 'scripts' and sophisticated statistical and game theory strategies," the companies must now maintain a webpage that provides information about players' success rates, including the percentage of winnings captured by the top 1, 5, and 10 percent of players.

Keep in mind this settlement also comes seven months after DraftKings and FanDuel agreed to stop taking bets from New York residents.

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