Daily fantasy sports companies offer differing messages to fans, courts
Listening to the relentless television commercials from daily fantasy sports companies, one could assume that any passionate sports fan can win huge sums of money in their contests.
“This is the feeling of turning a game you love into a lifetime of cash,” the voiceover in a widely-broadcast DraftKings Inc. spot intones. “Just pick your sport, pick your players, and pick up your cash!”
But last week, DraftKings and rival FanDuel Inc. were forced to tell a very different story in a New York courtroom. With Attorney General Eric Schneiderman arguing their contests are illegal under a state law that defines games of chance as gambling, the companies were put in the awkward position of having to say that their contests actually demand considerable skill to win.
In fact, their attorneys argued, just a handful of players win nearly all the prizes, and those players spend up to 90 hours a week studying athletes and crunching numbers to do it.
“If most people lose money and the same people continue to win repeatedly, that is absolute proof that this is a game of skill and not of chance,” said David Boies, a high-profile attorney hired by DraftKings to lead its fight in New York.
To prove the point, lawyers for both companies presented detailed statistical analyses to the New York judge who will soon decide whether to suspend the contests while the fight plays out in court. The numbers generally echo an oft-cited McKinsey & Co. study of daily fantasy baseball, which found a mere 1.3 percent of fantasy players won about 91 percent of the prize money, while 85 percent of players lost money.
The daily fantasy companies also explained in court the lengths to which players go to win. Peter Jennings, a former stock broker from Colorado who has won millions playing daily fantasy sports on the site and appears in a DraftKings ad, testified that he spends 70 to 90 hours a week preparing for and playing daily fantasy contests —
“I believe my success is the result of the immense amounts of research and preparation and the sophisticated analysis I have developed over years of playing,” Jennings wrote in an affidavit filed in the New York case. “I create my own custom player projections and models based on the information and historic performance data I collect. These models employ advanced statistics to predict player outcomes. I also use game theory to maximize my return on investment.”
Schneiderman contends that the advertisements gloss over how much work players such as Jennings must put in to win consistently. In his lawsuit against DraftKings, for example, he accused it of false advertising, saying its commercials imply “that a casual player is likely to win a jackpot.”
Despite the unlikelihood of a casual player winning big, the attorney general maintains that the contests are illegal games of chance, since the outcome still rests on events that are subject to luck. For instance, a skilled daily fantasy player may lose to another skilled player simply because an athlete on her roster was injured or because a game was rained out. The judge hearing the case must decide whether such strokes of bad luck play enough of a role in daily fantasy contests to qualify them as gambling.
Marketing consultant David Hagenbuch has questioned whether the fantasy sports ads violate the Federal Trade Commission’s “truth-in-advertising” standards.
“For them to say in court that very few people win the games, but then in the ads to really imply that there are a lot of winners — and not just a lot of winners, but big winners — is very misleading and hypocritical,” Hagenbuch, who advocates for ethical ads, said in an interview.
Hagenbuch noted that guidance from the FTC in 2009 did away with the old “results not typical” disclaimer. Ads featuring testimonials from customers who did not have a typical experience now must “clearly disclose the results that consumers can generally expect.”
DraftKings did not respond to a request for comment Friday. However, in court filings, the company has said its ads are not misleading and that anyone who plays can win.
“Even advertisements inviting people to become contestants on popular game shows like ‘Who Wants to Be a Millionaire’ would constitute deceptive advertising under [Schneiderman’s] logic,” the company wrote.
Some recent DraftKings ads include small-type text that says the average user’s winnings are $1,263 — a figure that doesn’t reflect how much users paid in entry fees. In Massachusetts, new regulations for daily fantasy sports companies proposed by Attorney General Maura Healey include a requirement that such ads also disclose how much money the average player wins or loses after subtracting entry fees.
The proposed rules, which could go into effect early next year, would also mandate that fantasy companies identify the highly-skilled players in each contests and create games solely for beginners.
DraftKings chief executive Jason Robins has acknowledged that his company’s massive ad blitz — it spent about $154.5 million on commercials so far this year, according to iSpot.tv — attracted unwanted attention in addition to new customers. He said the tone of some spots was a mistake.
“That is something we’re paying a little more attention to with regards to some of the media uproar,” Robins said at a business conference in October.
He said the company was readying new ads “that really capture the essence of what the experience for a fantasy fan is like . . . versus just talking about the prizing aspect.”