FanDuel Accused Of False Advertising In Florida Lawsuit

FanDuel, the largest Daily Fantasy Sports website, has been accused of false advertising in a class action lawsuit filed in the United States District Court for the Southern District of Florida on November 20th. The class action suit was first reported by Mondaq.com earlier this week.

Presently, the FanDuel class action lawsuit has only a single named plaintiff, Joshua Carroll, who is being represented by attorneys Edward H. Zebersky and Philip A. Gold. The case number for the lawsuit is 1:14-cv-24431 and was assigned to the courtroom of Judge Joan A. Leonard. The lawsuit is seeking to identify other players who have had the same experiences with FanDuel as Carroll.

On November 21 a summons was issued to FanDuel in Florida.

The complaint

The suit alleges that the FanDuel initial deposit bonus violates Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) by offering a “dollar-for-dollar” match of a player’s deposit, however, the site requires the player to meet strict play-through requirements in order to access the bonus dollars.

At issue is the transparency of this requirement.

Under the Florida Free Gift Advertising Law people and companies are prohibited from using the term “free”  (or words or groups of words of similar intent according to the text of the law) in their marketing campaigns if there is any requirement of payment or compensation from the recipient.

Other examples listed in the law include: “awarded,” “prize,” “absolutely without charge,” “free of charge.”

According to the complaint, FanDuel uses terms such as “Deposit is 100% matched,” “double your deposit,” and “match up to 200 bucks, dollar for dollar,” in their advertising campaigns, which the suit alleges falls under the Florida Free Gift Advertising Law in FDUTPA.

Mondaq.com expects FanDuel to try to have the case dismissed, and they very well may emerge victorious, but even if they are successful FanDuel may find itself in more hot water if someone wants to apply the federal Truth in Advertising Act to their deposit bonus.  According to Mondaq.com:

“As we have previously  blogged, the Federal Trade Commission has been vigorous in enforcing its rules for false advertising.  We will continue to monitor this case.”

FanDuel’s deposit bonus

The central issue is the play-through requirements of FanDuel’s deposit bonus, something that is used at all DFS sites to my knowledge, as well as in regulated and unregulated iCasino, iPoker, and iSports-betting markets.

FanDuel requires players to wager 25-times their initial deposit before they receive their entire bonus – a paltry 4% clear rate – whereas most iGaming sites (poker and casino) have clear rates in the 10%-50% range, with most coming in right around 20%.

According to the lawsuit, Carroll deposited $25 on the site, wagered that money without winning and received just $1 in bonus money. In order for Carroll to receive the full $25 in bonus money he would have been required to wager $625 on the site.

It should be noted that even though the play-through requirements, and the other conditions imposed on bonus dollars are not made clear in their advertisements, FanDuel does not necessarily hide their bonus clearance rate; the details of which can be found on their website.

However, as I discovered firsthand when I created a FanDuel account earlier today, the play-through requirements are not clearly disclosed during registration, nor is it found in the site’s terms and conditions (which you agree to upon creating your account).

The first contact with this stipulation comes during the depositing phase. After you create your account you are prompted to make your first deposit, and can choose from several different bonus options. Each bonus is marked with an *, which leads to the page detailing how the deposit bonus works, and states:

“Your deposit bonus unlocks over time. Read more about how it works.”

Here is a screenshot of how this is presented during the signup process:

Long history of play-through requirements in online gambling

The lawsuit, whether successful or not could act as a wakeup call, not only DFS websites, but also licensed and regulated online poker and online casinos in the U.S.

The use of this type of marketing campaign dates back to the earliest days of the online gaming industry and has been a staple ever since, but this was largely during a period when the industry went unregulated.

The terms and conditions of deposit bonuses and other promotions need to be made extremely clear. Not only will you avoid any potential legal entanglements, but also because it will be less off-putting to your new customers, many of whom walk away from the site feeling swindled after depositing $200 and clearing only $15 of a $200 bonus.

Daily Fantasy Growing Pains

This legal action doesn’t spell impending doom for the daily fantasy sports industry. Any new industry is bound to experience some growing pains and this is just one of probably a few rough patches we’ll see as the industry matures.

What the legal action does show us is that important people are taking notice of online fantasy. Lawmakers have yet to challenge the industry as a whole due to exemptions provided in the UIGEA, but they’re obviously keen on enforcing certain standards. Market leaders such as FanDuel and DraftKings would be well advised to keep their legal teams on the roster to make sure they avoid similar pitfalls going forward.