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Fantasy Sports Ads Mislead and Violate FTC

10/24/2015

39 Comments

 
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by David Hagenbuch, Founder of Mindful Marketing
Thanks to the ubiquitous ads of Draft Kings and FanDuel almost everyone knows that you don’t need to be a professional athlete or coach to enjoy firsthand the thrill of elite sports competition.  This increasingly popular past-time has also garnered great media attention, however, as many are asking whether fantasy sports equal gambling.

While the gambling question is a very good one, overlooked is another important issue involving many fantasy sports ads: The commercials often convey atypical results that make the promotion illegal as well as unethical.

If you’re new to fantasy sports, here are the basics:  You choose, or “draft,” players from a professional sports league like the NFL, NBA, or NHL in order to form your unique fantasy sports team, which competes against other teams in a fantasy sports league.  Your team’s success depends on the real players’ statistical performance in their actual games.  Football players, for instance, typically earn you points for things like yards rushing, yards passing, and touchdowns.

In some fantasy sports leagues those points just translate into victories and bragging rights.  In other leagues, however, real money is wagered and won/lost, giving rise to the gambling issue.  That issue is escalated by the fact that fantasy sports have become a multi-billion dollar industry that continues to grow even as it already engages about 50 million Americans a year.

While the competition in some fantasy sports leagues spans the entire professional sports season such that your team’s ultimate results are not known for many months, other options have evolved to satisfy the need for instant gratification, namely Draft Kings and FanDuel.  These firms offer daily payouts for one-day contests.  Here also is where other important legal/ethical issues arise.

As of October 10, 2015, Draft Kings and FanDuel reportedly spent over $200 million in advertising.  Although the frequency of the ads has annoyed some viewers, the real problem lies in the payouts that many of their ads suggest.  For instance, the following are verbal quotes and visual text from several of their most common commercials:

Draft Kings:
“And best of all, you could win a ship-load of money.”  “Be crowned a fantasy football millionaire.”  

“Pete Jennings won over 2 million bucks playing fantasy sports at DraftKings.com.  He’s off living the high life now . . . “  “You know, you can even play Draft Kings one-day games with your season-long team for even bigger prizes.”   “Being super rich is awesome.”  “Yep, and DraftKings.com makes it possible to get your share of giant cash prizes and huge contests.”  “DraftKings.com—bigger events, bigger winnings, bigger millionaires.”    

“Get to DraftKings.com right now for one-day games that let you win daily, plus huge cash prizes every week and a shot at that juicy multi-million-dollar main event.” 

“That’s the guy that won a million dollars on Draft Kings.”  “Watch your points pile-up and collect your cash.  Welcome to the big time.” 

FanDuel:
FanDuel’s one-week leagues are paying out $2 billion this year--more money to more winners than any other site.”  Wesley M.—Winnings: $9,264; Mike B.—Winnings: $49,893; JP M.—Winnings: $3,725; Scott H.—Winnings: $2,136,431; Bradly C.—Winnings: $349.  “My third week of playing, I won $15,000 off of a $5 entry.”
 
“I’ve deposited a total of $35 dollars on FanDuel and won over 2 million.”

“Gil O.—61 wins, $1,297 winnings; Paulo H.—264 wins, $5,427 winnings; Chris P.—3,516 wins; $492,692.    

“Mike Schmalfeldt won $3,500 in a $10 league.”  “On FanDuel I’ve won over $62,000.”

Watching these commercials could easily lead one to conclude two things: 1) that people playing Draft Kings and FanDuel never lose and 2) that those who win typically score thousands, tens of thousands, or even millions of dollars.  Of course, after briefly thinking through the business model, it’s also easy to establish that neither of these promotional posits could be true: The only way firms can be paying out big winnings to even a few participants is if many more people are losing loads of cash.   

The silliness of the suggestion that everybody wins big hasn’t been lost on some creative copywriters who have posted comical FanDuel commercial parodies like this one on YouTube.  It’s also telling that the NCAA has recently decided to ban Draft Kings and FanDuel ads during NCAA championship events, including the NCAA women’s and men's basketball tournaments.

What’s surprising is that the Federal Trade Commission (FTC) has yet to crack down on these ads.  For many years weight loss ads and others had benefited by describing just the best scenarios of their most outstanding consumers.  The advertisers would then protect themselves legally by adding a disclaimer to the ad “Results Not Typical.”  In 2009, the FTC targeted this practice with a new mandate:

“Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor."
 
Somehow Draft Kings’ and FanDuel’s advertising has been allowed to side-step this very specific FTC ruling.  By highlighting only their best client outcomes with no clear recognition of the much more typical consequences (monetary losses), these fantasy sports leagues violate both pre- and post-2009 advertising law.  Beyond the legality, however, it’s also easy to imagine how such deceptive promotion might mislead people to think that they’ll be the next big winner, even though the odds are invariably against them.

Given the unusually high frequency of these ads, as well as the rapid growth of fantasy sports, it’s very likely that Draft Kings’ and FanDuel’s commercials are effective marketing that’s creating stakeholder value for those firms and many others.  The promotion’s deceptive content, however, compromises a very important societal value: honesty.  As a result, the call on the field should be that these fantasy sports ads are “Single-Minded Marketing.”
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39 Comments
Morgan Carr
10/24/2015 06:28:20 pm

I do agree that this is a single-minded ad and think that it is a great example of one! I personally have always had difficulty grasping what exactly would qualify for not upholding societal values, but gambling should definitely be a model example of this, thanks for the post!

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Stephen Joffer
10/25/2015 06:26:55 pm

The fact that the government has not cracked down on this at worst illegal and at the very least questionable marketing campaign is the most shocking. Its not like they haven't seen the commercials because they are everywhere. It is probably only a matter of time until this is shut down.

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Janell Goddard
10/26/2015 10:56:33 am

I think what is most sneaky about these ads is how subtly they downplay the fact that people who participate are gambling. They do not appeal to the risk or adrenaline in the same way that casinos or other gambling platforms do, so it seems more safe to put money into fantasy sports.

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Joshua
10/26/2015 02:15:42 pm

I thought this article was very thoughtful! being a sports fanatic, I am constantly seeing these advertisements when trying the watch my Seahawks play on Sunday. They all seem very single minded and a little dishonest.

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Matt T
10/26/2015 05:23:00 pm

Well written...thanks David. Regulation is definitely coming in the DFS industry and that is a good thing. I actually play a fair amount on DFS sites...typically breaking even over the long term. For me it is fun because I keep the money spent each week under $10 but it is very easy to see how people can lose thousands in DFS. It only takes one or two times playing a DFS game to realize just how difficult it is to win. One thing that the companies don't tell you is that those that do win "big" are typically submitting hundreds of lineups into one contest.

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David Hagenbuch link
10/27/2015 07:40:36 am

Thank you for sharing your personal experience and insights, Matt. They are very helpful for understanding what's happening in fantasy sports.

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Brandon
10/26/2015 10:24:34 pm

Let's not forget that using these sites is a form of gambling. Gambling is gambling. There is risk involved and each person is aware of the potential to lose. Therefore, as long as these sites are making it clear gambling and betting is involved they are in clear. Personally, I think betting/gambling is unethical. However, I think these sites are marketing within the ethical boundaries of marketing.

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James Yang
10/26/2015 11:03:35 pm

Fantasy sports is definitely growing bigger and bigger. I have personally played draft kings and it is very competitive and not easy to win as it is advertised. I believe they just banned it in Nevada however. I'm sure they'll eventually ban this site everywhere.

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Joshua Witczak
10/27/2015 12:51:34 am

Thank you for sharing this article. Overall I completely agree with the Single-Minded rating. I also agree that the advertisements place hope in the consumer. They only show the very best scenarios that are not really probable. Like others, I am also annoyed at the frequency that the ads are being sent out. It is actually just driving me away. Once again thank you for sharing.

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Chad
10/27/2015 01:32:43 am

I agree with the Single-minded rating. I find it interesting that it is such an effective strategy showing all of the highest payouts. I am naturally a skeptic of advertisements, and it really surprises me that this way of marketing attracts so many people.

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Rawley Hughes
10/27/2015 03:50:30 am

I totally agree with this article. Logically, we know that advertisements are going to put forth the best stories they can to appeal to customers. However, those numbers they put forth lead to unrealistic expectations in spite of that knowledge. Those numbers get stuck in our minds, and it takes a lot for us to overcome those expectations with our own reasoning.

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Matt T
10/27/2015 11:59:25 am

Fantasy sports leagues and winning money for doing well is nothing new. They have been going on for decades (started with baseball back in the 1960’s I believe). Even the "trending" Daily Fantasy Sports (DFS) industry is not new (Fan Duel started in 2009). What is new is the barrage of advertising during the current NFL season that has really thrust DFS into the mainstream public eye. The ads certainly paint a rosy picture of winning big bucks, but isn’t this the same marketing tactic as every infomercial ever created – fitness, supplements, medical cures, etc. “Purchase this new fitness machine and get ripped abs in just two weeks!” We all know that can’t happen and that a lot more goes into a trimmed waistline than a few minutes using an “Ab Coaster”. The DFS ads (as annoying as they are!) do a good job of getting people to check out their web site, but if you sign-up, it is abundantly clear what the entry fees are for a particular contest (anywhere from $0.25 and up). Also clearly posted before you enter a contest is the payout structure. You know exactly what the entry fee is and what position you must finish in order to win something. I can’t speak for all DFS sites, but Draft Kings also has a max limit of funds that you deposit into your account that you then use to enter various contests with. Additional regulation of the DFS industry is certainly needed and that ball is definitely rolling forward, but the ultimate responsibility lies on the consumer here in my opinion. Thanks for letting me share my thoughts.

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Tanner B
10/27/2015 06:54:42 pm

Thanks for sharing this article. I have been seeing these ads for a while now, and have always wondered what the chances are being the next "big winner". We always love seeing those big numbers on the screen and these two companies make it seem very easy to become one of those big winners. However, like the article says, it is actually very difficult. These ads sound very good, but we need to be able to get over how they sound and think about them logically.

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Brandon P
10/27/2015 07:25:43 pm

Great analysis of this issue. I agree that this is single-minded marketing. It's difficult to believe that some people would be duped into believing that everyone could win, or that a $5 entry would typically lead to a $15,000 payout. However, it is known that some people disregard logic when greed gets in the way.

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Wayne F
10/27/2015 07:59:27 pm

Thank you for your thoughts on this topic. I have seen many of these commercials in the past few weeks and have wondered how they can legally advertise all the big winners without even hinting at any other outcomes to playing. I certainly question the ethics and legality of this industry and in no way intend to participate in it.

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Terri V
10/27/2015 09:32:12 pm

I totally agree with this article on being rated as single-minded. I thought it was really interesting how you related these fantasy sports commercials to weight-loss commercials and showing unrealistic results. In economics class, we learned the difference between investing money and gambling and these fantasy sports sites definitely fall under gambling. Thank you for the post!

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Lucas Lee
10/28/2015 12:39:19 am

I definitely agree with all of the points made in this article. Websites like fan duel advertise their product to make it seem much more successful than it actually is. I think it is unfair to the consumer to show only the success stories during commercials and not give real facts to the percentage of the people that really make money.

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Stephen Tanquary
10/28/2015 08:21:27 pm

I agree with the points made in this article. I believe that someone should hold these organizations accountable for the questionable/deceitful marketing strategies, but I also think it's important for consumers to educate themselves and not believe everything that they see, hear, or read. Thanks for the article!

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Duke Choe
10/28/2015 10:28:23 pm

The views and points made by this article, I believe, are definitely true. Our society has come to a place where we promote gambling and seems like it can be done at any and all ages. These ads will manipulate children's and viewers minds as they see "millions" of dollars won. We have to do something about this as citizens and the government definitely has to have some control.

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Ryan Urastu
10/29/2015 02:38:50 am

I agree with the points that the article makes, but I fail to see what the big fuss if about. While the advertisement is definitely illegal it is still the consumers' responsibility to do their own research. Every advertisement is going to highlight the benefits of a company's product/service and downplay the cost.

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Ruben P
10/29/2015 04:09:51 am

As sports has grown in the U.S. it is easy to see how things such as fantasy football and basketball has become a large-scale, money-making machine. However, I do agree how these marketing ploys made by these big time companies can be single-minded. They target and cater to only those who are; a) interested in sports, and b) are willing to gamble on it. Overall, I feel like it was a good decision to ban their ads during certain sporting events, if anything it might seem like an casino commercial offering fake glory and riches. But, as a functioning business, they do have the right to advertise (freedom of speech) as much as they are allowed to.

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Bradley Fallentine
10/29/2015 06:37:10 pm

Thank you for sharing this article. I thought it was insightful but I do not agree with all of it. I have noticed that fantasy sports have grown substantially in the past few years and that the way of advertising is slightly dishonest. However, I would say these companies have the right to advertise how they wish, even if it is unethical . It should be the choice of the broadcasting network, to accept or deny these ads.

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Cyrus Dela Cruz
10/29/2015 10:39:29 pm

Wow, this article gave me a broader perspective on the idea of Fantasy Sports. I knew that these players won money, but I didn't realize that these types of ads would be banned. I could see the reason why though!

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Joseph Park
10/29/2015 10:51:28 pm

Thank you for your insight on fantasy sports. I have friends who are very into betting their money (or bragging rights) on their draft, but I did not think about what kind of the advertisements fantasy sports were making. Like you mentioned, I have come across "unusually high frequency" of those ads, but never really bought into their promises - particularly because of my disinterest towards sports. I could definitely see why their advertisements are "single-minded marketing."

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Ryan Andrews
10/30/2015 02:08:05 pm

This blog left me feeling that even though these FanDuel and DraftKings commercial promising winnings. They are just saying that so more people will play. How do you know that you will win money. Their advertisements are just a big gambling situation. That why I don't on those websites.

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Derek Villalobos
10/30/2015 08:06:12 pm

I have always thought that this commercial was too good to be true. Those people who win are a probably less than 1% of all who participate in this. They only display the fun side of gambling, which makes the person feel as though it is acceptable. However, participating in that is wrong and most people lose tons of money because of this participation is gambling. This only helps the stakeholder because this act does not create a good image for society.

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Logan Hunsberger
12/9/2015 08:15:54 pm

It is such a normal commercial, trying to make you think that every time you play you will win big. People need to realize that if you are gambling away REAL money then their are people that try to make a living off this and obsess over it. This is what makes these gambling sites so hard to win on because there are so many people playing and one must realize when going into a game that the odds will not be with you when playing. Sometime you have to learn the hard way, i think they need to be more honest with their commercials and also people should know what they are getting into.

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Thank you, James. It will be interesting to see if the ads change much this fall when the companies will probably start running more of them again.

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