By Matthew E. Milliken
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.
It was only eight years ago that former National Basketball Association referee Tim Donaghy pleaded guilty to two felony charges of sharing inside information with gamblers while also placing bets on games. The NBA didn’t suffer much from that scandal, but that might not have been the case had the public ever learned whether or not Donaghy, who made a great deal of money from his wagers, made calls in a deliberate attempt to affect point spreads.
No sports official wants her league or team tainted by allegations of taking dives or point-shaving. That’s a big part of the reason why Pete Rose, baseball’s all-time hits leader, has been banned from working for or appearing on the field of any Major League Baseball team for more than a quarter-century.
On the other hand, professional sports leagues are clearly interested in daily fantasy sports. The National Hockey League, Major League Soccer and Major League Baseball have all reportedly invested in DraftKings, while a majority of teams in both the NBA and the NFL have inked deals with FanDuel or its competitor.
And that makes sense, in a way. To influence the outcome of a wager on the final score of one contest between two teams, a gambler need only pay — or blackmail — one or two individuals, whether they be players, coaches or officials.
But daily fantasy sports are a different matter because the outcomes of these competitions generally hang on the performances of individual athletes. It’s difficult to influence the ultimate result of a contest involving dozens, if not hundreds, of players by paying off athletes, especially when many of them already take home million-dollar salaries.
So it’ll be interesting to see where things go. But as long as government officials think they’re getting double-talk from daily fantasy sports websites, and as long as the public has good reason to suspect that insiders are using (or leaking) information for illicit gains, the daily fantasy sports quest for respectability and profitability will be extremely difficult.