If you are at all interested in sports, chances are good that you have heard of DraftKings and FanDuel. For the rest of us, let’s take a minute to get a little background.
These two companies are known to be the largest online daily fantasy sports sites. Each day you can log in to your account and choose a lineup for your fantasy team. This means that every day you select players for each of the different roles as you would for a real team. As the season progresses, you then gain points for different plays that your players make in their real games. This means that if you managed to pick the best players, you could end up with a lot of points at the end of each week.
DraftKings and FanDuel have successfully turned the fantasy league creation process into a real opportunity to win big money. For sports fans, there is no better type of online gambling than through joining a real-stakes fantasy league competition. The process is quite simple. You pay a small fee of to join a competition, say, 5 or 10 dollars, and then you try and rack up the most points. In the end, cash prizes are awarded to the highest placing players. These prizes often total up to over a million dollars. There are a huge variety of different competitions available so there is something for everybody.
So What Happened That’s So Big?
Now that we have a little bit of background behind how these sites work, let’s get into the meat of this story. You see, it has recently been revealed that DraftKings employee Ethan Haskell won a second place prize in a FanDuel competition which netted him $350,000 in winnings. Ordinarily this would be a cause for celebration. However, since Mr. Haskell was privy to information on betting statistics from the DraftKings database, many critics think that he had an unfair advantage.
According to Daniel Wallach, a sports and gambling lawyer from Becker and Poliakoff, “It gives the player a distinct edge in a contest” and is therefore “absolutely akin to insider trading”. Both DraftKings and FanDuel have strict rules in place against employees participating in any of their own competitions, but they were not banned from joining a competitor’s game. Since this recent controversy, DraftKings and FanDuel have released a joint statement temporarily banning employees from participating in competing sites. However, DraftKings states that their employee did not cheat on the draft.
DraftKings says that Haskell did not gain access to the data until 1.40 PM. This time was 40 minutes later than the FanDuel deadline of 1 pm, so Haskell cannot have cheated on the competition. This is not to mention that even if he had had access to the information earlier that in no way would provide him with the means to win. The data in question was statistics about player choices from other players. Knowing what the majority of other players are picking can help you make decisions, but ultimately there is no way to know how any particular player will do during a game. In reality, sports games do not always go the way they are predicted, and many times an upset can happen that nobody saw coming. Because of this, Ethan Haskell would have had a mild advantage at best.
It is likely that we will never know if there was foul play involved in this incident, but what matters is that it has stirred up the daily fantasy scene. Currently fantasy sports take advantage of a special exception for sports in US gambling laws. In 2006, laws were passed against internet poker and other gambling sites, but major sports leagues convinced Congress to let fantasy sports remain because they helped to boost fan engagement. However, as the stakes continue to rise, fantasy drafts are beginning to look more like pure online gambling.
Currently daily fantasy games generate over 2 billion dollars annually, and this number is predicted to continue rising yearly. Eventually Congress will be forced to deal with this issue by either regulating online sports sites or banning them altogether. If scandals continue to happen such as this, there will continue to be more bad press generated for the sites. This is something that neither DraftKings nor FanDuel are looking for. As for the rest of us, all we can do is sit back and wait to see what happens.