Boston-based DraftKings and FanDuel, two juggernauts of the daily fantasy sports realm, have agreed as part of a settlement to each pay $1.3 million after an investigation revealed allegedly unfair and deceptive practices by the companies, Massachusetts Attorney General Maura Healey announced Thursday.
The attorney general’s office launched an investigation into the two companies in early 2015 and “found that some participants in daily fantasy sports contests were not adequately protected,” Healey’s announcement and the settlement say without providing further detail.
Both companies were cooperative during the investigation and have since made changes to their practices to “to protect consumers with respect to gameplay fairness, protections for minors, responsible gaming requirements, fairness in advertising, and data and funds security,” Healey’s office said.
The alleged unfair and deceptive practices took place before Healey’s office promulgated consumer protection regulations for the fledgling fantasy sports industry. Since those regulations were put in place, the attorney general’s office has said it has not received significant complaints about the industry.
“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 statement. “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.”
Healey’s announcement came hours before the New England Patriots are set to kick off the 2017 NFL season, and in doing so, unofficially kick off the daily fantasy football season as well. Two years ago, daily fantasy sports exploded into the mainstream when ads for DraftKings and FanDuel were ubiquitous on television, the Internet, and in public places like South Station.
In a statement, DraftKings General Counsel Tim Parilla said the process of working with Healey’s office was “productive and collaborative,” and said the company is “pleased” to have reached an agreement to pay the AG’s office $1.3 million.
“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,” Parilla said in a statement. “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.”
FanDuel said it worked closely with Healey as her office reviewed fantasy sports and promulgated its regulations, and since has been working to enact similar protections in other states.
“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,” the company said in a statement. “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.”
According to the two companies, DraftKings and FanDuel have a combined 787,808 registered players from Massachusetts and took in more than $17.6 million in revenue from the state in 2016. Nearly 1,100 Bay State players won $600 or more last year totaling $13.4 million in prizes that were taxed as income in Massachusetts.
According to the settlements, the total $2.6 million payment from DraftKings and FanDuel is intended to “defray the costs to the Commonwealth associated with reviewing and identifying practices specifically related to offering fantasy sports contests to Massachusetts consumers … further ensure that Massachusetts remains at the cutting edge of consumer technology and consumer safety, and … further advance economic development in Massachusetts in the technology sector.”
Healey’s office said funds from the settlement will be used “for grant programs to protect consumers and engage young people in technology.” Each company is to make an initial payment of $500,000 by September 15 and installments of $400,000 by September 1, 2018 and September 1, 2019.
Last year, DraftKings and FanDuel reached a settlement with New York Attorney General Eric Schneiderman in which they each paid $6 million for repeated false advertising violations In New York. Shortly after that settlement was announced, the two companies agreed to merge into one but that plan was scrapped in July after federal regulators sued in an attempt to block it.
