The move comes just before the start of the NFL season. Daily fantasy football constitutes the most important segment for the two DFS operators.
More on the DraftKings, FanDuel settlements
The office of Massachusetts Attorney General Maura Healey conducted the investigation and announced the $2.6 million in penalties on Thursday. Each site will pay $1.3 million to the state. The AG’s office did not specify or elaborate on the practices that resulted in the settlement.
The two sites paid a combined $12 million last year to the state of New York in a similar case.
Healey’s office said that the AG entered into the settlement agreement with the companies as a result of their behavior prior to regulations she implemented in 2016.
“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 press release. “We have since implemented a set of comprehensive regulations that provide consumers with broad-ranging protections and that have served as a model for many other states.”
Many of the 2016 regulations that came from Healey dealt with consumer protection. Massachusetts was the first state to deal with and implement regulation of the DFS industry.
More from the release:
Both DraftKings and FanDuel cooperated throughout the investigation and have made significant changes to their business models to protect consumers with respect to gameplay fairness, protections for minors, responsible gaming requirements, fairness in advertising, and data and funds security. Each company represents that it is now in full compliance with the applicable regulatory requirements.
DFS companies react
Tim Parilla, general counsel for Boston-based DraftKings, offered this statement on the settlement:
DraftKings is pleased to have reached this agreement with the Massachusetts Attorney General’s office and conclude what has been a productive and collaborative process.
Over the last two years, the Attorney General’s office has done an excellent job of working to fully understand DraftKings, our business and the fantasy sports industry. That expertise informed the Massachusetts regulations which have now become the national model for common sense, consumer-focused fantasy sports regulations.
As the Attorney General said, this agreement resolves prior issues that were addressed through new regulations and DraftKings’ implementation of the industry’s most comprehensive compliance and game integrity programs. We are proud of the responsible environment we have created for our consumers and grateful to the Attorney General for working with us throughout this process.
And more from a FanDuel spokesperson:
We have worked closely with the Massachusetts Attorney General’s office in their review of fantasy sports, including their issuance of the first set of consumer protection regulations for our industry, which we were pleased to comply with since their inception in 2016.
FanDuel has worked tirelessly to pass laws in 16 states that solidify the fantasy sports industry and implement many of these same important consumer protections. FanDuel’s efforts have ensured that sports fans are able to continue playing the games they love in a safe, regulated environment and as we head into this football season, we look forward to continuing these efforts.
What was Massachusetts investigating?
As stated above, we don’t know exactly what Massachusetts was looking into. Nor do we know why DraftKings and FanDuel agreed to the settlement.
But Healey’s office affords her wide-ranging powers related to consumer protection. DFS regulations or no, she could have looked into how the companies were operating in the state.
But the template was likely the same as employed in a 2016 settlements in New York with AG Eric Schneiderman. Those settlements resolved “lawsuits alleging false and deceptive advertising practices by the companies.”
There, we saw far more of what the AG’s office alleged and settled with the companies, through the actual agreements. For example, the NY AG found that DraftKings and FanDuel:
- Used advertisements that gave false and misleading statements about the likelihood of players winning DFS contests.
- Claimed to fully match players’ initial deposits but were deceptive in how that money could be available to users.
- Did not take adequate steps to help problem gamblers or provide safeguards to those at risk.
FanDuel and DraftKings did not admit to or deny the findings in the settlement from a legal standpoint. However, it’s fair to guess that Healey was using some of the points brought up in NY.
Settlements in more states?
The settlement in Massachusetts came out of the blue. However, it does not appear likely that other states are poised to join New York and Massachusetts.
First, not state all AGs have the kind of power wielded by Schneiderman and Healey on consumer protection issues.
Second, interest from state AGs has largely waned. While a variety of AGs have declared DFS to be illegal gambling under existing statutes, almost none have taken the same level of interest as in NY or Massachusetts.
Now, legislatures are being left to act on whether to legalize and regulate the DFS industry. Sixteen states have passed such laws to date.
While it’s not out of the realm of possibility, the likelihood of more deceptive advertising settlements or investigations would appear to be low.