In June, we covered Daily Fantasy Sports (“DFS”) operators’ major legislative victory in New York: a bill legalizing and regulating their business, ending the potential for an outright prohibition on DFS in the state. That bill’s passage was akin to clinching the pennant.

With the New York Attorney General (“NYAG”) announcing yesterday that it settled the remaining false advertising claims it lobbed against leading DFS operators DraftKings and Fanduel, the DFS industry appears to have just swept the World Series.

The NYAG’s false and deceptive advertising claims against DraftKings and Fanduel boiled down to a few key purported flaws in their marketing practices:

  • Advertisements misled novice players about the advantages high-volume and professional players had over them;
  • Advertisements contained false and misleading statistics about the likelihood of winning cash prizes;
  • Testimonials used about player success omitted key information about the players featured, such as, experience in sports analytics or industry reputation as a go-to fantasy sports analyst; and
  • Marketing gave the impression that participation in DFS was harmless, fun, and generally without risk, despite evidence of the dangers associated with compulsive gambling and addiction.

DraftKings and Fanduel agreed to settle their respective NYAG actions for $6 million each. They also agreed to adopt consumer protection-based safeguards, including adequate disclosures about the terms and conditions and limitations of promotions.

Takeaway: This settlement serves as a reminder to advertisers of the potential costs associated with games that toe the line between lawful promotions and illegal lotteries. It also represents the importance of carefully considering the marketing practices used to advertise promotions: claims must be substantiated (including the odds and expectation of winning), testimonials must be accurate and not misleading, and target audience vulnerabilities should be considered.