DraftKings, FanDuel Settle Mass. “Unfair and Deceptive Practices” Investigation for $1.3 Million Each

The NFL season began last week and with it, the most important few months for the daily fantasy sports (DFS) industry. Football (American football, that is) is the biggest betting sport in the United States and the NFL is easily the most popular sport for fantasy sports. The first week of the NFL season is like Christmas for DFS sites and fantasy players alike. Unfortunately for industry giants DraftKings and FanDuel, they each began the season $1.3 million in the hole as the result of settlements made with the Massachusetts Attorney General’s Office last week.

Massachusetts StampAccording to a press release from the AG’s Office, both DraftKings and FanDuel were investigated by Attorney General Maura Healey, Assistant Attorney General Dan Krockmalnic of the AG’s Consumer Protection Division, and Gary Klein, Senior Trial Counsel in the AG’s Public Protection and Advocacy Bureau, for “alleged unfair and deceptive practices by the companies prior to her office’s 2016 promulgation of regulations governing daily fantasy sports.” Each company settled with the AG’s Office for $1.3 million, money which will go to “grant programs to protect consumers and engage young people in technology.”

Healey’s office did not specifically explain what these “unfair and deceptive practices” exactly were, but we can take a couple guesses. As you may very well remember, when daily fantasy sports really hit it big a couple years ago, DraftKings and FanDuel engaged in a marketing war that saw each of them outspend almost every corporation out there – including the likes of Coca-Cola and AT&T – on television commercials. Ads for both sites aired during virtually every commercial break on national sports broadcasts and people soon got tired of seeing “fantasy bros” going nuts over winning a bunch of money playing DFS.

The constant commercials certainly helped the sites attract customers (though the sites still weren’t pulling a profit because of all the guaranteed contest money they were doling out), but the annoyance of the ads also brought them unwanted attention from lawmakers and law enforcement. One criticism people had – and this is where I think much of the “unfair and deceptive practices” come in – is that the advertisements made it look like it was easy for any sports fan to enter a DFS contest and win a bunch of money. In reality, almost everybody loses money in the long run; like in poker, it is the heavily bankrolled experts with loads of DFS resources and time to invest studying who win most of the money. The commercials didn’t tell you that. They just made it look like any dude with a football jersey and a backwards baseball cap who knew Aaron Rodgers was a great quarterback could win thousands of dollars, even millions.

The DFS companies also boasted generous deposit bonuses, saying they would match deposits up to hundreds of dollars. Those of us who have been accustomed to poker deposit bonuses for a decade-plus knew what these were all about, but people new to gambling and DFS had no idea and most probably didn’t bother to check the terms and conditions before depositing. Most likely expected these large matching bonuses to be given to them up front, but in reality, they were released little by little and not until after players wager a decent amount in the contests.

Again, we don’t know exactly what Healey and her team were investigating, but the above is probably a good guess.

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

FanDuel responded publicly to the settlement on its website, saying:

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.

DraftKings also released a statement, but rather than posting it on the company’s website, it was issued to the media via DraftKings’ legal counsel, Tim Parilla:

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.

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