March 21, 2016
Earlier today, reports surfaced that the Attorney General for the State of New York had entered into settlement agreements with fantasy sports industry leaders FanDuel and DraftKings in connection with the companies’ respective pending lawsuits with the State. Given the size of the New York market, the effects of the settlements will likely soon reverberate throughout the industry on a nationwide basis.
What are the key provisions of the State’s settlement with the daily fantasy giants?
FanDuel and DraftKings entered into substantially similar agreements that mandate each of the companies to:
- Block all people located in New York from entering fantasy sports contests that involve an entry fee, effective immediately;
- On their respective websites, include New York in the list of states where contestants may not deposit funds or enter paid contests;
- Process all requests from New York users to withdraw their account balances;
- Agree to adjourn (until the Fall) the appeals taken from the preliminary injunctions previously entered against the fantasy sports companies;
- Importantly, the agreement to adjourn the respective appeals seems calculated to delay a decision by the courts in contemplation that the State legislature may ultimately pass legislation in the current session expressly determining the legality of (and prospective regulatory framework for) fantasy sports contests in New York.
Please note that while the settlement agreement purports to resolve the competing arguments regarding the legality of fantasy sports contests generally, at least temporarily, the agreement expressly reserves the State’s claims against the companies for charges of deceptive advertising. As we have previously written, the State has sued FanDuel and DraftKings for their respective claims concerning contest participants’ ability or likelihood to win fantasy sports contests, claiming the representations to be false and/or misleading.
Avoiding Fantasy Sports-Related Liability
As fantasy sports contests, and the laws and regulations that govern them, continue to grow and evolve, it is essential that fantasy sports enterprises keep abreast of the developing legal landscape. The New York Attorney General’s settlement with FanDuel and DraftKings makes clear that even while issues regarding the legality of fantasy sports contests remain fluid, regulators are equally concerned with preventing fantasy sports operators from making unsubstantiated or deceptive advertising claims about the products that they offer. As such, operators should regularly review their respective contest platforms, entry fee, prize structures and marketing materials with knowledgeable counsel in order to effectively navigate the current regulatory landscape.
If you are interested in learning more about this topic or pursuing a fantasy sports venture, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
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