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Fantasy Football Giant Hit With Potential Class Action for False Advertising

Kim Gomlak, MBA | Marketing Director

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One of the most prominent players to emerge in the burgeoning “for profit” fantasy football industry has become the target of an action that seeks class certification for false advertising claims stemming from a promise to double users’ cash deposits. DraftKings, a platform that permits registrants to play fantasy sports and win cash prizes, is the defendant in Aguirre v. DraftKings, Inc., a case which seeks remedies for claims under the Florida Deceptive and Unfair Trade Practices Act, Florida Free Gift Advertising Law and fraud in the inducement under Florida common law.

According to the complaint filed in U.S. District Court for the Southern District of Florida, DraftKings operates as a legal, online casino permitting users to wager on sporting events like football and basketball and awarded an aggregate $200 million in prizes to its one million users in 2014. DraftKings, like its biggest competitor FanDuel, operates under a narrow exemption under The Unlawful Internet Gambling Enforcement Act of 2006 that excludes this specific gambling-like activity from the definition of illegal bets or wagers.

The complaint alleges that DraftKings embarked upon a widespread television, radio and web advertising campaign promising prospective customers that, if they registered for an account, their initial deposit would be instantly doubled (e.g., $50 deposit would be credited for $100 upon transfer). However, when users registered, the matching funds were disbursed in small increments as the funds were wagered, not instantly upon deposit:

“Specifically, customers must enter fantasy contests and receive bonuses in incredibly small increments. Rather than the guaranteed, instant, 100 percent deposit match, customers receive as a bonus a mere four percent of every dollar they put into play.”

One way to gauge the success of this type of fantasy sports is through the financial backing of its main players, with DraftKings alone raising a $41 million round of venture financing in 2014. This class action could net a significant recovery for misled fantasy sports enthusiasts given the sheer volume of users on the DraftKings platform and the “dollar-for-dollar” match at the heart of the damages.

 

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