iGB Diary: Daily fantasy sports is serious business, no doubt about that

9 October 2015

Could the ‘data leak scandal’ currently engulfing daily fantasy sports betting’s two main proponents in the US, DraftKings and Fanduel, be the start of a regulatory process that will end up with the vertical being regulated and licensed in the US?

No one can tell but there is no doubt it has been a very bad week for the industry, its image and for what it reveals of the (lack of) internal controls at both companies. Then again the cynical among us might be wondering how such a ‘scandal’ hadn’t happened earlier. 

The fact that DraftKings employee Ethan Haskell was able to use the reams of information to which he has access thanks to his work and bet on a million-dollar contest on Fanduel, DraftKings’ major rival, is one thing. After all, plenty of trading executives at betting companies are also allowed to bet, just not through their company’s site.

However, Haskell somehow revealed he had access to information showing which players are most picked, before all team selections are completed and locked down. He then came second in the contest and won US$350,000. We’re not talking loose change here.

This sits uneasily with the DFS community, to put it mildly. It says Haskell had a clear unfair advantage over regular bettors and gained from insider knowledge. DraftKings and Fanduel deny any impropriety, although their joint statement that “employees with access to this data are vigorously monitored and we have no evidence anyone misused it” had something of a George Orwell ring to it.  

New York Attorney General Eric Schneiderman then announced that he had launched an inquiry into how DraftKings and FanDuel employees could gain from having access to the data. Schneiderman has sent a series of questions to both operators which Legal Sports Report published here and here, both companies must answer by 15 October.

US sports leagues such as Major League Baseball, which has a stake in DraftKings, said it was “surprised to learn that DraftKings allowed its employees to participate in daily fantasy games”. Once again, it’s another statement that stretches the bounds of credulity. More to the point, it puts US sports leagues and their investment in fantasy sports betting, financial and reputational; under a harsh spotlight.

The fact that some of them have invested and are shareholders in the likes of DraftKings has led many critics to point out that their continued opposition to regulated sports betting, the NBA being the one high profile exception, places them in a serious conflict of interest; and it’s hard to disagree with such an argument. 

Meanwhile the New York Times’ leader writers’ ears must have been burning as it published an op-ed on Monday (before the scandal broke the next day), criticising the spread of DFS and wall-to-wall advertising of operators during that weekend's NFL games.

One of the article's key lines has to be: “It is hard to believe that this is what Congress had in mind when it exempted fantasy sports from a law (UIGEA) that effectively outlawed Internet gambling in 2006.”

US casino and betting operators such as William Hill US boss Joes Asher (paywall) have also repeatedly said that DFS is gambling (for example: betting on a first goalscorer on the back of his form, history, strike rate etc. is no different to the criteria applied by DFS punters in their selections) and want to see it regulated.

While PokerStars parent company Amaya yesterday called for tougher state regulation of DFS in the US, further anecdotes were coming out about DFS operators giving their top customers special APIs that enable them to put together more teams and faster, which of course doesn’t sit well with other players; who feel those VIPs get an unfair advantage. 

One contact put it like this: “If DraftKings and FanDuel continue to run loose they are going to kill the game sooner than the ‘bubble would burst’ on its own. The hope in the US is that land-based operators and lotteries will start to deploy their own DFS offers and bring it into a regulated environment, where fairness is required. This is not to say they will over-regulate DFS, but there will be rules to try and ensure all players are on a level playing field.”

The fact that DFS is compared to ‘poker on steroids’ with regard to its recent growth goes some way towards explaining poor business practices and PR hiccups.

However, the result is that the authorities, as shown by New York’s Attorney General, are not looking on it with a sympathetic eye and calls for further regulation from the AGA, lotteries or bookmakers will only get louder. 

The role of the media groups, ESPN, Yahoo and so on, may also go a long way towards determining the fate of DFS. They have put their working relationship on hold for the time being, but should the networks withdraw their marketing and advertising platforms, the likes DraftKings and Fanduel could be left in serious limbo. 

Just kidding!
Speaking of PR mishaps (to put it kindly), FanDuel’s head of PR is none other than Justine Sacco. The name might not be familiar but the deed was memorable. She was the 'PR guru' who got sacked from her job after publishing the following tweet. 

Great sense of humour eh… She got on the plane to South Africa with no idea of the furore she’d caused and found out she’d been sacked from major media and internet company IAC (among others it owns Vimeo and The Daily Beast) when she landed. Talk about jumping from the frying pan into the fire.

You know you’ve made it...
when you’re on iGaming… ok, on the BBC. The coverage the League of Legends quarter finals will get from the UK's national broadcaster might be online-only and on BBC3, one of its smaller channels, but from small acorns and so on. Then again, eSports betting companies should pay close heed to what's been happening with DraftKings and Fanduel this week. The vertical is on everyone's minds right now and like any new, unregulated sector, it should keep its house in order in case a scandal explodes and the media, public and regulators react angrily towards it.

 

Have a great weekend!