New York AG Eric Schneiderman Wins $12 Million Daily Fantasy Sports Contest
Posted on: October 26, 2016, 10:00h.
Last updated on: October 26, 2016, 10:34h.
New York AG Eric Schneiderman has won the biggest payout in daily fantasy sports (DFS) history. Of course, he didn’t score the win by assembling a roster of athletes and competing against other DFS entries.
On October 25, Schneiderman announced a settlement had been reached with DFS leaders DraftKings and FanDuel that will direct a total of $12 million to New York. The two DFS operators will each pay $6 million to resolve Schneiderman’s claims that they repeatedly engaged in false advertising and misled New Yorkers into playing the online contests.
“Today’s settlements make it clear that no company has a right to deceive New Yorkers for its own profit,” Schneiderman declared in a statement.
Schneiderman said his investigation found that the two platforms deceived casual and novice players about the risks of competing against high-volume DFS pros, gave false and misleading statements about the likelihood of winning a cash prize, failed to match promised initial deposits, and marketed DFS as harmless fun.
“DraftKings and FanDuel will now be required to operate with greater transparency and disclosure and to permanently end the misrepresentations they made to millions of consumers,” Schneiderman continued. “These agreements will help ensure that both companies operate honestly and lawfully in the future.”
The state attorney general has made more than his fair share of headlines recently. In addition to targeting DFS, Schneiderman went after the charity of Republican Party presidential nominee Donald Trump earlier this month in what was panned as a partisan move by GOP operatives. Schneiderman is a registered Democrat.
The settlement between Boston-based DraftKings and Manhattan’s FanDuel with Schneiderman appears to be in the best interest of all parties. The treaty allows Schneiderman to declare his pursuit a victory, but for DFS, it’s a monumental triumph.
Last Spring, Schneiderman announced he would seek the return of all buy-ins made by DFS players in New York, plus a $5,000 per customer fine.
An estimated 600,000 New Yorkers had tried a DraftKings or FanDuel contest at the time, meaning the companies were potentially looking at $3 billion in fines.
While still a substantial amount of money, $6 million each won’t signal the end of the two DFS operators.
There’s never a good time to hand over $12 million in fines, but the timing is especially poor for the daily fantasy sports leaders.
According to a recent report in The New York Times, DraftKings and FanDuel are running out of money. The paper points to Schneiderman’s agreeing to allow the companies to pay the fine through installments as proof that they are strapped for cash.
Times journalist Joe Drape says over 60 employees have been laid off, and the companies are struggling to meet day-to-day operational costs and pay outside vendors.
After a slow summer, the NFL was supposed to be DFS’ saving grace. But enthusiasm for the league is down, as 11 percent fewer viewers are tuning into pro football games.
Since both DFS companies are privately held, it’s difficult to tell how the decline in NFL viewership is impacting daily fantasy revenues.