Daily Fantasy Sports: FanDuel, DraftKings Settle New York State Lawsuit

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On Tuesday afternoon, daily fantasy sports companies DraftKings Inc. and FanDuel Inc. reached a $12 million settlement with the state of New York to end their ongoing litigation about false advertising in an enforcement action filed a year ago by Attorney General Eric Schneiderman.

The companies agreed to pay $6 million each and reform their marketing, which will include clear disclosure of terms and conditions for promotions and resources for people at risk of gambling disorders and addictions. The companies also must maintain a website with information about the rate of success users have in their contests.

The settlement ends false advertising claims in two lawsuits by Schneiderman last October, which alleged promises of big jackpots that were deemed fraudulent and misled consumers. It had led to months of legal uncertainty for the burgeoning daily fantasy sports industry or DFS.

Schneiderman had dropped several claims alleging DFS was illegal gambling under state law after New York lawmakers explicitly legalized DFS contests earlier this year. Gov. Andrew Cuomo signed the legislation in August, and the New York State Gaming Commission soon issued temporary permits allowing the companies to resume their contests in the state in time for the current NFL season.

Though the DFS law ended a threat that could have forced DraftKings, FanDuel, and other DFS operators to permanently end paid contests in New York, a key market for the industry, the false advertising claims against the companies were kept alive.

Tuesday’s settlement puts an end to those claims and provides more certainty on what DraftKings and FanDuel will have to pay as they have been forced to expend much of their resources in legal and lobbying costs, as well as new licensing fees in individual states.

Although the litigation now ends in New York, both companies still have to navigate some treacherous waters in other states, as well as another ongoing litigation in Massachusetts. With this settlement in New York, however, daily fantasy sports received a crucial victory in a major sports market.

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Robert D. Cobb
Founder, Publisher and CEO of INSCMagazine. Works have appeared and featured in places such as Forbes, Huffington Post, ESPN and NBC Sports to name a few. Follow me on Twitter at @RobCobb_INSC, email me at [email protected]