Fantasy Fandemic

“You pay money in hopes of winning more money. If you don’t, you’re out. By a rudimentary definition of the term, that’s “gambling.” -Joe Namath.

Nigel Eccles, founder and CEO of Fanduel, and Jason Robbins, CEO and founder of DraftKings, will tell you their product is absolutely not online gambling or sports wagering. They will base their argument on the principle of skill versus chance. I believe that while skill is involved in Daily Fantasy Sports, chance plays a much more pivotal role in the determinant of winners. No matter how “skilled” a player could be labeled as being, the chance already present given the nature of sporting is now multiplied by uncontrollable circumstances such as weather, injuries (minor or major) and last minute depth chart reconfiguration.

Daily Fantasy Sports burst on to the scene in the form on FanDuel in 2009, and it didn’t take long for a competitor to enter the booming market, in 2012 DraftKings joined the hysteria. The two companies bombarded the airwaves with advertisements promising to turn average guys into overnight millionaires. Often with the same message, small deposits, huge payouts. According to Ispot.tv, each corporation spent $10 million on television advertising in the first week of September, 2015.

For the initial couple months their overly-dramatic ads saturated the sports media market from 30 second ads during games to sponsored luxury sections in stadiums such as the DraftKings Fantasy Lounge at the Wells Fargo Center in Philadelphia. Daily Fantasy Sports is up there with Facebook for immediate relevance among users.

So it’s literally everywhere… but what is it?

A spin-off of traditional fantasy football, daily fantasy football encompasses many of the same elements used in it’s predecessor. The scoring of the game is pretty much consistent, as competitors are rewarded points based on their teams’ players: yards, receptions, touchdowns, field goals etc.

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What sets DFS apart from just plain old fantasy football is the fact that you draft a new team each week. In traditional fantasy football, each team’s “owner” drafts once at the beginning of the season, and it is up to that owner to adapt to league trends by adding players via trade or through the waiver wire. With DraftKings and Fanduel these “in-season” elements are completely eliminated.

In stead, each week owners draft new teams in a format that places the highest prices on the highest valued players. For example, a running back who touches the ball over 20x/game is going to be priced higher than a second string receiver who may or may not touch the ball. A common acceptance among players of this game is that the key to success is identifying the players who are cheap but poised for a big game maybe based on who their playing.

The game by itself seems fun and like it would be a good way to engage in friendly competition among friends, and why not? It’s a consistent model that has proven tremendously successful since it’s dawn in the 90’s.  When you add the element of depositing money in order to participate to the already well-known presence of chance and luck, this quickly escalates from a game to calculated gambling.

The debate over whether daily fantasy sports is gambling or fantasy sports is stemmed from the Unlawful Internet Gambling Enforcement Act. The UIGEA is a 2006 ruling which prohibits “gambling businesses” from accepting electronic payments in connection with a “bet or wager.” Fantasy sports games are exempted under UIGEA, however, as long as the games meet certain criteria. FanDuel and DraftKings believe their games satisfy the three-fold requirement:

  1. Payouts are made clear to users before the game takes place, and the number of users does not determine the payout.
  2. Winning reflects “the relative knowledge and skill of the participants and are determined predominantly” by the accumulated statistics of individuals across “multiple” sporting events.
  3. Users can’t win prizes as a result of the performance of a team as a whole (say, the entire San Diego Chargers), the outcome of a game or the performance of a “single” individual athlete.

Louis Bien

Through these three loopholes Daily Fantasy football has survived criticism of being an online gambling outlet. Number one has substance because it is true, a predetermined payout is listed if a player enters one of the “pools”.  However it’s credibility is lost when we see that with online sports wagering, pretty much all bets on a team, point total, etc. give you a forseen payout. The third exception doesn’t bother me, while you can wager a bet on a single player in most professional football and basketball contests, it is an overwhelmingly small population of gamblers that rely on player proposition bets.

The second requirement represents the most obvious argument against itself. To put in a way that can be understood for the non-gambling/non-fantasy sports playing common man, it is saying that success or failure in the game, is a result of someone having more or less significant knowledge of the event than those also participating. Critics, like New York Attorney General Eric Schneiderman, argue that same such circumstances are blatantly evident in other gambling industries such as poker; specifically online poker, which was BANNED under that very same Unlawful Internet Gambling Enforcement Act.

Much like Daily Fantasy Sports, Online poker shot out of a canon at it’s conception. Quickly rising from a fad in gaming, to a near-million dollar company. Also consistent with DraftKings and FanDuel, it fell under immense legal pressure as it’s popularity skyrocketed. After the 2006 UIGEA ruling, online poker pulled out of states and shifted it’s focus overseas to a land of less legal constrictions.

No exploitation of the corruption of daily fantasy sports would be complete without mentioning the lopsidedness of distribution among those who actually win money on these sites. I myself as a freshman in college noticed something about the advertisements, these ads show men winning bulk sums of cash, on minimum deposits. That must mean a whole chunk of people are not making any money?

Turns out, Daily Fantasy sports works on an age old crafty system sometimes referred to as the Sharks & Minnows process. A simple process, sharks, the number crunchers who have devised a way to somewhat make a living doing this sort of craft, prey on the minnows, those individuals who saw the millions of ads and could not help but to give it a try.

In order to put numbers to this example, in the first half of the 2015 MLB season, Sports Business Daily put together data about the players making profit. “They found that 91% of DFS player profit was won by just 1.3% of players.”SportsBusinessDaily It is commonly accepted these numbers translate pretty consistently with the NFL and alike, seeing as most of the time it is the same people playing.

One interesting thing about this research is all of this scrutinization and controversy seemed to surface just recently, meaning within the past 2 years or so. Overnight the two corporations went from under a rug to under a microscope when DraftKings employee Ethan Haskel, won $350,000 on rival site FanDuel.

Haskel, a written content manager was accused of having access to secret information that would give him an unfair advantage. In week 3 of the 2015 NFL season he came in second place in a tournament worth $5 million. Ultimately it was ruled that he did not expose the information until the games that day had already begun, deeming the lineups locked.

In a report by the law firm Greenburg Traurig, Haskel’s name was cleared. “GT’s independent investigation has concluded that it was impossible for Mr. Haskell to have gained such an advantage in the FanDuel contest in which he won a prize because he received the non-public information forty minutes after the deadline for submitting his lineup in the FanDuel contest.” Ethan Haskel: Summary of Findings

Maybe Mr. Haskel did use the information, maybe he didn’t. Regardless of what information he or anyone else has, the element of chance and luck had to have been just as influential to his, or any participants winnings.

Chance plays a role in sports yes, but chance all too in control when it comes to prediciting sports. After all, it’s why we watch sports in the first place. If it were all so predictable we’d get bored and it would become like a stale sit-com we’ve seen a hundred times. But it’s not, its consistently inconsistent and it’s unpredictability is what keeps us coming back.

And for all these reasons I believe that when you are paying money, predicting an occurrence, and expecting to either lose that money, or win additional money for your correct presumption, you are wagering a bet.

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Additional Sources:

Business Insider

New York Times

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