The 'Ladies Day' ad, created by Crispin Porter & Bogusky, aired on TV in February, but was quickly pulled by broadcasters. Clearcast had originally cleared the ad for broadcast, but later changed its stance.
The ad centred on Ladies' Day at Cheltenham, and opened with a shot of the brand's Facebook page with a voiceover stating: "Ian Reed wrote on our Facebook wall 'Can't wait to see some beauties at Cheltenham Ladies' Day'.
The creative then showed a series of shots from the racecourse, while the voiceover carried on: "We hear you Ian and we're going to make Ladies' Day even more exciting by sending in some beautiful transgendered ladies! Spot the stallions from the mares!"
The ad then showed a series of women and men dressed as women, at Cheltenham, while the voiceover stated "woman," "man," and at one point "dog, I mean, man".
The ASA now says it actually received 92 complaints, including complaints from the Kent Transgender Forum and LGBT Diversity. The complainants called the ad offensive, suggesting the material condoned and encouraged harmful discriminatory behaviour.
Paddy Power claimed it was "saddened" to know consumers were offended by the ad, stating the ad's script had been shared with the Beaumont Society, the transgender support group, and Clearcast, to ensure the ad met with broadcasting and decency standards.
However, the complaints were upheld and the ad has been banned.
An online version of the ad also appared on Paddy Power's Youtube channel and Facebook page. As Paddy Power is based in the Republic of Ireland, the Advertising Standards Authority Ireland (ASAI) judged on the ad. The ASAI ruled the online ad should also not run again.
Follow Loulla-Mae Eleftheriou-Smith at @loullamae_es