DraftKings, FanDuel Pay $6 Million Each To Settle New York Daily Fantasy Sports Case

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The battle between New York state and daily fantasy sports operators DraftKings and FanDuel appears to be over.

$12 million to settle NY case

The office of NY Attorney General Eric Schneiderman announced that DraftKings and FanDuel reached separate $6 million settlements to resolve “lawsuits alleging false and deceptive advertising practices by the companies.”

“Today’s settlements make it clear that no company has a right to deceive New Yorkers for its own profit,” Schneiderman said in a press release announcing the settlements. “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. These agreements will help ensure that both companies operate, honestly and lawfully in the future.”

According to the AG’s office, the “agreements impose the highest New York penalty awards for deceptive advertising in recent memory.”

The settlements are payable over the course of the next three years; half will be due for the final payment in 2019.

It’s the second time the AG’s office and the two sites agreed to a settlement. The first time, DraftKings and FanDuel agreed to pull out of the state while the legislature and governor worked on a bill that was eventually enacted this summer. 

Ahead of that settlement, Schneiderman alleged that the two companies were running afoul of the state’s laws on gambling.

Inside the DFS settlements

The settlements — which were signed by DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles — can be seen here and here.

More from the AG’s office:

The agreements also require sweeping reforms to the companies’ marketing, including clear disclosure 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.

Furthermore, the companies will be 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.

Both settlements state early on that the AG’s office found that each site “misled customers on key aspects of its games.” From a legal standpoint, the sites neither admit to nor deny the findings outlined by the AG’s office.

But the settlements cover a wide behavior by the two sites, including inaccurate advertising of win rates by players, portraying professional DFS players as “regular Joes” and issues with how they presented deposit bonuses.

The settlements also touch on a lack of problem gambling protocols:

FanDuel identified and targeted users with a propensity for gambling and addiction, but failed to disclose the risks of playing its contests or provide adequate safeguards.

The same passage appears in the DraftKings version.

FanDuel and DraftKings statements

A DraftKings spokesperson released this statement after the settlement:

“Today’s settlement concludes the process that we began with the New York Attorney General’s office last March. We are pleased to move forward and as our business continues to grow, we are focused on ensuring that millions of passionate sports fans across the country are able to continue engaging in an innovative way with the sports and athletes they love.

We are grateful for the support we’ve received from hundreds of thousands of New Yorkers, leading to a regulatory framework for fantasy sports that was confirmed by New York lawmakers and Governor Cuomo last summer. ”

FanDuel spokesperson Justine Sacco offered this statement:

We have reached a settlement with the New York Attorney General today. As previously stated, the negotiations were tough but fair, but we are very pleased to have reached a resolution as this allows us to focus on our busiest time of year with NFL, NHL and soccer in full swing, and NBA season starting tonight. We look forward to providing sports fans, especially our New York users, the contests they love.

Why now for the settlement?

The case was headed to court in the near future, according to a report from the New York Times, if it was not settled.

That explains the timing of the settlement; there’s no point to taking it to court if the DFS operators wanted to settle out of court.

It doesn’t explain the why, however. Six million dollars a piece seems like a lot of money to agree to pay for false advertising claims, if you think you have any case whatsoever. As always, the possibility of a merger of the two sites might necessitate getting rid of as many legal issues as feasible.

Part of the dynamic in the state — and with Schneiderman — is a new lawsuit alleging that the fantasy sports law enacted by the state government is unconstitutional.

In a bit of irony, Schneiderman — who has been the biggest enemy of the DFS industry — will be in charge of defending the law in court. Previously, Schneiderman had argued that daily fantasy sports violates the state constitution.

Other lawsuits/legal problems still hanging around

The New York case is far from the end of legal issues hanging over the DFS industry:

The settlement in New York at least opens up the possibility that other states could leverage their truth in advertising laws to take DraftKings and FanDuel to task as well.

That’s not to mention the legality of DFS remains an unsettled matter of law in states around the country. DraftKings and FanDuel have pulled out of several states in the past year because of legal concerns.

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