By Ken Adams
It was just a few weeks ago. The San Francisco 49ers looked unbeatable. DraftKings (DK) and FanDuel (FD) were leading the league of television advertisers. All three looked like sure winners for the 2015 National Football League season. A lot has happened since then. The 49ers have been exposed as pretenders to the throne. The once promising quarterback is struggling and both the defensive and offensive lines look like rejects from college football. Damn, I could just sit down and cry; actually that is what I do every week after the 49ers game of the week. But as painful as the 49er fall from glory has been, the two mega-fantasy sports guys may have fallen farther and harder.
Fantasy sports, after years of traveling below the radar, has been outed. The entire nation discovered fantasy sports and DK and FD by watching football on television. The hundreds of millions of dollars of television advertising was impossible to ignore. And then when fantasy sports was in full view, a scandal erupted. An employee of DraftKings won $350,000 playing in a FanDuel contest. The combination of the raised visibility and scandal put fantasy sports and the two mega-companies right into the line of sight of politicians looking for a leg up on their opponent. This is election season and for the next twelve months, campaigning and political posturing will dominate the media and the national dialogue. That means that any issue that can be politicized will be. At the moment fantasy sports has fallen into a political quagmire. In several states, politicians have called for investigations into fantasy sports and legislation to control it. National politicians have been just as eager as their counterparts at the state level to get some press over the issue. Harry Reid and several other senators have called for comparable actions at the federal level.
A major scandal is erupting in the multibillion-dollar industry of fantasy sports, the online and unregulated business… the two major fantasy companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading. Joe Drape Jacqueline Williams, New York Times, 10-7-15
Two of the biggest daily fantasy sports sites are the target of an inquiry by New York State Attorney General, who requested data from the firms after allegations surfaced that employees placed bets using internal data. Christie Smythe, Scott Soshnick/ Keri Geiger, Bloomberg, 10-7-15
The top Democrat in the U.S. Senate called on Congress to examine fantasy-sports betting services on Tuesday after reports that an employee with access to insider information placed bets in the unregulated multi-billion-dollar industry. Andy Sullivan/ Diane Bartz, Reuters, 10-7-15
DK and FD reacted immediately. They claim nothing untoward happened, but just in case, they will investigate. Further, they will willingly submit to regulation. They have not commented on taxation, which will of course come with regulation. While they were developing a strategy to deal with the crisis, some lawyers were developing their own strategy. A suit has been filed that claims all of the contestants were playing a rigged game. The lawsuit claims insiders have information other players do not have and therefore the whole thing is unfair and dishonest.
The hullabaloo over fantasy sports is generating a dialogue that probably should have taken place in 2006 before Congress decided all online betting was illegal, except fantasy sports. The questions not asked then, are being asked now: Is it skill? Is it chance? Is it gambling? Is it online gambling? Whatever your answer is to any of those questions, there are people who believe exactly the opposite. The national debate will center on two questions – is it a skill-based activity and is it gambling? Massachusetts is the only state so far that has stood up for fantasy sports. Attorney General Maura Healy has said fantasy sports is not gambling and it is legal. The director of the state lottery thinks it could be the next great idea for the state lottery. No other state seems quite so certain.
Attorney General Maura Healey said she’s not pursuing any criminal inquiries into the Boston-based fantasy sports league website DraftKings Inc…She said that there were no federal or state laws that prohibit daily fantasy sports sites from operating, and customers who use DraftKings’ services shouldn’t be worried that they’re breaking the law. “We’re not looking to shut them down,” she said. Steve Annear, Boston Globe, 10-8-15
But back on the field of play, it appears the average player, does not care about all of that noise. He is only interested in sports and getting a little action every week. Both FanDuel and DraftKings are still in business and the average sports fan got what he wanted last weekend. But DK and FD are the ones that had the best week; 7 million people signed up to play with them and paid $43 million for the privilege.
Allegations of cheating within the two biggest fantasy sports companies, DraftKings and FanDuel, haven’t scared off their customers. A record number of people entered tournaments for Sunday’s NFL’s games, according to an analysis from SuperLobby, an industry research firm based in the UK. Together, the top two sites received 7.1 million entries to their guaranteed prize pool tournaments, generating a whopping $43.6 million in entry fees. Joshua Brustein, Bloomberg, 10-12-15
Now, if I were a betting man, which of course I am not, I would put my money on the money. I would draft DK and FD for my team. At least for this season, they are playing as well as Tom Brady and Aaron Rodgers; neither Brady nor Rodgers is guaranteed a seat at the Super Bowl, but they certainly are in a better position than Colin Kaepernick and the San Francisco 49ers. However, regardless of the adverse publicity, calls for legislative controls and a presidential-year’s election campaign posturing, I think both FanDuel and DraftKings are guaranteed a spot in Super Bowl 50.
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