Breaking News — Daily Fantasy NOT Gambling
Daily Fantasy sports has been in the news a LOT recently with a growing controversy over whether it was actually gambling or not. With some States going so far as to try and implement bans.
We decided to investigate this brand new industry that seemingly sprung up over night and has captivated the sports nation.
Now the premise and appeal are both genius and undeniable. Use the basic tenants of normal Fantasy Sports that takes entire seasons to play out and micronize them into daily parcels. No more crappy draft at the start of a year totally screwing up your enjoyment for the whole season. Draft a bad team one night? It’s cool, just come back and draft a new one the next day…. oh, and hey, why not throw a little money on it to keep it extra interesting? Don’t worry though, almost all of it gets returned to players in prizes.
One of the first steps¹ we took was to dabble a little bit. So we signed up to Draft Kings and we were off to the races. 3 months later and a few hundred bucks lighter, it sure seemed awful similar to gambling² but let’s break it down. There was the spectre of extraordinarily large payouts, sometimes upwards of $1 million, for very little input ($1 to $100 entry fees). There was the addictive nature of it; we originally set out to burn through $100 and be done. Then IT happened, we turned a $20 entry into $150 one time, and even though the balance ended up hitting zero, we decided to re-up. And re-up. And re-up. Well, thankfully regular season football ended, and so did the “experiment”.
Now in the middle of all this, lots of other stories were being written as well. There was the cross-play scandal between Draft King and Fanduel employees which got the Feds finally looking into this quietly gigantic industry. Then came the stories about the types of people who played the most and won the most, more on this later. So here we are, is it gambling or not?
Side A – Gambling:
The States that have decided to investigate have mostly decided that they feel it IS gambling. They argue that “it’s a sports based game of inherent chance where you wager money”. (Hard to specifically argue against that, other than if you simply change the words from sports to stocks and wager to invest; that line ends up describing financial markets rather than gambling)
Side B – Not Gambling:
The companies suggest that this is a game of skill³. They argue that “it is a game of skill where can you invest money and obtain huge returns if you know what you’re doing”. (Again, hard to specifically argue against that, other than if you simply change the word from invest to wager; that line becomes more about poker than Daily Fantasy)
Seems like murky waters to us… well prepare for it to get even dirtier.
The ultimate point in all of these discussions may not be whether or not it’s gambling, (because it does seem to exist in this weird grey area with strong points on both sides), but that it’s a seedy, unregulated format open to exploitation and possible corruption.
The New York Times published an excellent expose piece exploring all the nefarious ways the system can, and is, being exploited. We won’t rehash those, just check the piece out here. But it turns out, Daily Fantasy has loop holes, back doors and work arounds that would make even Wall Street blush.
CONGRATULATIONS Daily Fantasy companies; we agree!, it’s NOT gambling. Period. However, that might be the least of your worries. It turns out it’s just an incredibly flawed system that seemingly exploits the ignorant and innocent to the benefit of a few. Whether or not government officials end up classifying this as gambling won’t matter, if the industry doesn’t clean itself up and enact some sort of 3rd party regulation, it will implode upon itself. After all, the only reason it sparked government ire in the first place was essentially due to lack of regulation protecting the integrity of the process.
- Steps… Mistakes… who can tell the difference
- Either that, or I’m a complete idiot that couldn’t compete against other more “knowledgeable” sports fans out there
- If you consider it skillful to throw 100’s of entries up in single categories and use script bots to manage last minute roster changes.