FTC Settles Social Media Influencer Investigation With CSGO Lotto

Advertising Law

On Sept. 7, 2017, the Federal Trade Commission (FTC) made public its settlement with YouTubers Trevor “TmarTn” Martin, Thomas “Syndicate” Cassell and their company CSGOLotto, Inc. (Respondents), over allegations of multiple failures by Respondents and other influencers they sponsored to adhere to the FTC’s recently updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (the Guides). While no fines were imposed, the Respondents agreed to ensure that they and those they sponsor will adhere to the Guides going forward, and further agreed to additional FTC oversight of their business operations for the next ten years.

The FTC’s Complaint

As detailed in the complaint, Martin and Cassell are online influencers who operate YouTube channels with millions of subscribers, focused on online gaming and eSports. Many of their videos garner millions of views each.

Martin and Cassell also own a combined 85% interest in CSGOLotto, Inc., which operated an online gambling website that allowed users to gamble “skins” (cosmetic overlays with distinctive patterns for characters and items) from the popular first-person shooter Counter Strike: Global Offensive, or CS: GO (CSGO Lotto). Because “skins” can be bought, sold or traded for real-world money, CSGO Lotto allowed them to be used as a sort of virtual currency. The website earned revenue by charging an 8% service fee on skin-betting pools.

The FTC alleged that Martin and Cassell made numerous endorsements of CSGO Lotto, without ever disclosing their ownership interest. The FTC alleged that this information would be material to consumers considering playing CSGO Lotto, making the failure to disclose a deceptive practice.

Below are some excerpts and examples of Martin’s and Cassell’s endorsements as listed in the FTC’s complaint:

  • YouTube video quote from Martin: “I’ve been starting to bet a little bit more. … [W]e found this new site called CSGO Lotto, so I’ll link it down in the description if you guys want to check it out. But we were betting on it today and I won a pot of like $69 or something like that, so it was a pretty small pot, but it was like the coolest feeling ever. And I ended up, like, following them on Twitter and stuff, and they hit me up. And they’re, like, talking to me about potentially doing like a skins sponsorship, like they’ll give me skins to be able to bet on the site and stuff. And I’ve been, like, considering doing it.”
  • YouTube video by Martin with the title “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)”
  • YouTube video by Cassell with the title “INSANE KNIFE BETS! (CS:GO Betting)”
  • Tweet by Martin: “Made $13k in about 5 minutes on CSGO betting. Absolutely insane. Reactions here: [YouTube link].”
  • Tweet by Cassell: “Bruh.. I've won like $8,000 worth of CS:GO Skins today on @CSGOLotto I cannot even believe it!”

Beyond their own posts, Respondents also paid other influencers between $2,500 and $55,000 to endorse CSGO Lotto, without requiring that these influencers disclose their compensation. The FTC alleged that this led directly to a number of influencers not disclosing their compensation, or doing so inadequately. Again, the FTC found the lack of appropriate disclosures to be materially deceptive.

Below are a few of the endorsements listed in the FTC complaint:

  • Tweet by influencer @hotted89 endorsing CSGO Lotto: “25,000.00 @CSGOLotto COINFLIP!!! BIGGEST COINFLIP OF MY LIFE!! RT’s appreciated ;) [YouTube link]”
  • Tweet by influencer @G2NBK endorsing CSGO Lotto: “Stream is live at http://www.twitch.tv/nbk ! Ready to play FPL and fight you on @CSGOLotto”

The Settlement

Going forward, Respondents have agreed that they will provide their paid endorsers with detailed information regarding disclosure obligations. Respondents are also required to monitor paid endorsers to ensure their posts comply with Respondents’ disclosure obligations. In appropriate instances, Respondents must terminate relationships with endorsers that fail to adhere to the disclosure obligations.

Finally, Respondents must regularly report to the FTC on any business in which they have an interest for a period of 10 years from the date of the settlement, including in the event of structural changes, sales, mergers or acquisitions. This will allow the FTC to closely monitor all of Respondents’ business dealings to ensure compliance with the other terms of the settlement.

Why it matters

While no fines were imposed this time, the FTC has shown its willingness to enforce strict compliance, reporting and monitoring requirements that may result in significant oversight costs on influencers who flaunt the Guides. Influencers—and companies seeking endorsements—should take note that ignoring the Guides may result in expensive and long-term repercussions for their reputation and their business.