Archive for October 21st, 2015

Will daily fantasy sports become the type of sports gambling that sports leagues, the government and the public can learn to love?

October 21, 2015

By Matthew E. Milliken
MEMwrites.wordpress.com
Oct. 21, 2015

Earlier today, I wrote about the obstacles that daily fantasy sports websites such as FanDuel and DraftKings have run into recently. Now I want to consider what might happen going forward.

I agree with Barry Petchesky’s conjecture that short-term greed could lead to a crackdown on daily fantasy sports. As he wrote earlier this month:

Daily fantasy, for all its flaws, could [have been] the wedge that facilitates real gambling with good laws.

That seems unthinkable now, though, because that would require running a long game, and there’s too much money in play here for anyone to think long-term. The daily fantasy bubble feels like nothing so much as your bog-standard VC scam. The companies’ valuations have been pumped up to irrational levels from a rush of outside capital—each is valued at more than a billion dollars, according to the latest rounds of fundraising—and some people are going to become very, very wealthy when they cash out. (DraftKings cofounder and CEO Jason Robins argued strongly yesterday that the industry should not be regulated.) The growth is unsustainable, and whether the bubble pops from a federal probe or death-by-a-thousand-legislations or a loss in public confidence caused by reports like this week’s, that won’t trouble the people who got out in time.

I’m not quite as sanguine as Petchesky that legalizing and heavily regulating all sports betting is a wise idea. One of the reasons why it’s illegal to pace wagers on the outcomes of sporting events in many places is that heavy betting gives people incentive to try to influence outcomes by unsavory means.

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Daily fantasy sports websites face an uphill battle when it comes to winning over regulators and consistently making money

October 21, 2015

By Matthew E. Milliken
MEMwrites.wordpress.com
Oct. 21, 2015

FanDuel and DraftKings are the two most popular daily fantasy sports websites; they’re also the sponsors of an immense, seemingly inescapable advertising blitz that has been inundated consumers of American media ever since the late summer. (CNN Money reported that the two companies spent more money on TV ads than the entire beer industry over the four-week period that began on Aug. 14.)

But these businesses have been going through a rocky patch ever since revelations surfaced that their workers have access to vital aggregate data about player patterns and were allowed to participate in competitions on rival sites — although not their employers’. Both companies recently changed their policies and have now banned employees from entering contests on any daily fantasy sports websites, albeit reluctantly. As The New York Times reported in September:

[A] DraftKings founder, Paul Liberman, said barring employees from playing could make it difficult to retain talent.

“We have some people who make significantly more money off of our competitors’ sites than they do working for DraftKings,” he said.

Surely it’s coincidence that DraftKings workers who might have access to privileged insider information about betting patterns on DraftKings were able to win millions of dollars on FanDuel… or maybe it isn’t?

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