Difference between revisions of "Daily Fantasy Sports"
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− | '''Daily Fantasy Sports (DFS)''' are a type of contest in which entrants compete against one another in assembling rosters of professional athletes. | + | '''Daily Fantasy Sports (DFS)''' are a type of online contest in which entrants compete against one another in assembling rosters of professional athletes. Entrants are awarded points based on the statistical performance of their players in real-world contests. Two companies dominate this market: DraftKings and FanDuel. These competitors have announced thy plan to merge as one in late 2017. The companies stated their common legal issues as a reason to merge. One example of these issues was a DraftKings employee allegedly using insider information to win $350,000 on FanDuel. Additionally the companies have faced accusations of using false advertisement. Furthermore, the companies have been banned from a handful of states as these states consider Daily Fantasy Sports to be gambling. However the majority of states still allow the companies to operate within their borders, by characterizing their product as “Games of Skill”. |
== Gameplay == | == Gameplay == | ||
− | [[File:Draftkings.png|thumbnail|right| | + | [[File:Draftkings.png|thumbnail|right|DraftKings roster selection interface ]] |
− | Daily Fantasy Sports features contests for a variety of leagues including: [https://en.wikipedia.org/wiki/NFL NFL], [https://en.wikipedia.org/wiki/MLB MLB], [https://en.wikipedia.org/wiki/NBA NBA], [https://en.wikipedia.org/wiki/NHL NHL], and even less popular leagues like [https://en.wikipedia.org/wiki/MMA MMA] and [https://en.wikipedia.org/wiki/CFL CFL]. <ref name=DK> | + | Daily Fantasy Sports features contests for a variety of leagues including: [https://en.wikipedia.org/wiki/NFL NFL], [https://en.wikipedia.org/wiki/MLB MLB], [https://en.wikipedia.org/wiki/NBA NBA], [https://en.wikipedia.org/wiki/NHL NHL], and even less popular leagues like [https://en.wikipedia.org/wiki/MMA MMA] and [https://en.wikipedia.org/wiki/CFL CFL]. <ref name=DK> DraftKings Site https://about.draftkings.com/ </ref> |
There are two main categories of daily fantasy sports: cash games and tournaments. <ref name = Roto> Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments </ref> In cash games player’s who outscore at least 50% of the competition are deemed as winners. These winners receive a payout of roughly double their entry fee. On the other hand tournaments typically pay out only entrants who score in the top 20%. But the tournament prizes often exceed million dollars. <ref name = Roto> Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments </ref> <ref>Guaranteed Prize Pool http://dailyfantasysports.codes/basics/daily-fantasy-basics-what-is-a-guaranteed-prize-pool-gpp/</ref> In both cases, entrants who are below the winning threshold lose their entire entry fee. | There are two main categories of daily fantasy sports: cash games and tournaments. <ref name = Roto> Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments </ref> In cash games player’s who outscore at least 50% of the competition are deemed as winners. These winners receive a payout of roughly double their entry fee. On the other hand tournaments typically pay out only entrants who score in the top 20%. But the tournament prizes often exceed million dollars. <ref name = Roto> Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments </ref> <ref>Guaranteed Prize Pool http://dailyfantasysports.codes/basics/daily-fantasy-basics-what-is-a-guaranteed-prize-pool-gpp/</ref> In both cases, entrants who are below the winning threshold lose their entire entry fee. | ||
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== Background of Major Companies == | == Background of Major Companies == | ||
− | Two companies currently capture 95% of the US daily fantasy sports market: [https://en.wikipedia.org/wiki/DraftKings | + | Two companies currently capture 95% of the US daily fantasy sports market: [https://en.wikipedia.org/wiki/DraftKings DraftKings] and [https://en.wikipedia.org/wiki/FanDuel FanDuel]. <ref> Advertising Age Publication: http://adage.com/article/media/draftkings-fanduel-spe/300658/</ref> |
=== Major Companies === | === Major Companies === | ||
− | ==== | + | ==== FanDuel ==== |
− | + | FanDuel was launched by the web based prediction market [https://en.wikipedia.org/wiki/hubdub Hub Dub ] in July 2009.<ref name= History>History of Daily Fantasy Sports: http://dailyfantasynews.com/the-complete-history-of-the-daily-fantasy-sports-industry/</ref> FanDuel has raised $363 million in funding.<ref name= comp>Comparison: http://www.legalsportsreport.com/3832/fanduel-or-draftkings/</ref> FanDuel has a partnership with the [https://en.wikipedia.org/wiki/NBA NBA].<ref name = Partnerships> Partnerships http://www.legalsportsreport.com/dfs-sponsorship-tracker/ </ref>The New York City based company has most recently been valued at $1.2 billion dollars.<ref name= 'comp'/> | |
− | ==== | + | ==== DraftKings==== |
− | + | Former Vistaprint [https://en.wikipedia.org/wiki/vistaprint Vistaprint] executives Jason Robins, Paul Liberman and Matt Kalish established DraftKings in January of 2012 <ref name = "History"/> DraftKings has received $776 million in funding.<ref name= 'comp'/> The [https://en.wikipedia.org/wiki/MLB MLB] and [https://en.wikipedia.org/wiki/NHL NHL] have formed partnerships with DraftKings.<ref name = Partnerships/> The Boston based company has most recently been valued at $1.2 billion dollars.<ref name= 'comp'/> | |
===Merger=== | ===Merger=== | ||
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In October 2015 a DraftKings employee, Ethan Haskell, won $350,000 in a FanDuel contest. Haskell earned this prize by placing second in FanDuels’s NFL Sunday Millions contest. <ref name=Scandal>Scandal Report: http://fortune.com/2015/10/07/draftkings-fanduel-scandal-timeline/ </ref> | In October 2015 a DraftKings employee, Ethan Haskell, won $350,000 in a FanDuel contest. Haskell earned this prize by placing second in FanDuels’s NFL Sunday Millions contest. <ref name=Scandal>Scandal Report: http://fortune.com/2015/10/07/draftkings-fanduel-scandal-timeline/ </ref> | ||
− | It is believed that Haskell was able to win these contests, in part, because of his access to player ownership data <ref name="Scandal"/>. This means he may have seen which NFL players had been selected by DraftKings users, and by how many users. This information would have given him an advantage on | + | It is believed that Haskell was able to win these contests, in part, because of his access to player ownership data <ref name="Scandal"/>. This means he may have seen which NFL players had been selected by DraftKings users, and by how many users. This information would have given him an advantage on FanDuel because the two sites work very similarly and typically have the exact same price for each player in a given week. |
=== Company Response === | === Company Response === | ||
− | In response to the scandal, | + | In response to the scandal, DraftKings and FanDuel released a joint statement: |
''“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”'' <ref name="Scandal"/> | ''“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”'' <ref name="Scandal"/> | ||
==False Advertising== | ==False Advertising== | ||
− | The New York attorney general Eric Schneiderman began investigating both | + | The New York attorney general Eric Schneiderman began investigating both DraftKings and FanDuel; after he discovered evidence that the companies were misleading customers through advertisements.<ref name=False>False Advertising Report: http://adage.com/article/digital/fanduel-draftkings-agree-pay-6-million-amid-false-advertising-claims/306477/ </ref> Schniederman claimed that the companies’ advertisements led potential players to believe they had a real shot at winning; when few players win money over time.<ref name="False"/>This is centered on the idea that a subset of contestants termed "Grinders", who utilize automated computer scripts and sophisticated statistical strategies, reap massive payouts at the expense of casual users.<ref>How casual users are being tricked: https://www.nytimes.com/2016/01/06/magazine/how-the-daily-fantasy-sports-industry-turns-fans-into-suckers.html </ref> |
===Penalities=== | ===Penalities=== | ||
− | [[File:stats.png|thumbnail|right|The newly required user payout statistics as displayed on | + | [[File:stats.png|thumbnail|right|The newly required user payout statistics as displayed on DraftKings official site]] |
− | + | DraftKings and FanDuel each agreed to pay $6 million to settle the false advertising violations cited by the New York Attorney General.<ref name="False"/> Also FanDuel and DraftKings are now required to provide information about the distribution of winnings on their respective websites.<ref name="False"/> These statistics show that, over the past six months on DraftKings the top 1% of players have claimed 44% of the available winnings. <ref name=DK/> | |
==Legality== | ==Legality== |
Revision as of 22:03, 20 February 2017
Daily Fantasy Sports (DFS) are a type of online contest in which entrants compete against one another in assembling rosters of professional athletes. Entrants are awarded points based on the statistical performance of their players in real-world contests. Two companies dominate this market: DraftKings and FanDuel. These competitors have announced thy plan to merge as one in late 2017. The companies stated their common legal issues as a reason to merge. One example of these issues was a DraftKings employee allegedly using insider information to win $350,000 on FanDuel. Additionally the companies have faced accusations of using false advertisement. Furthermore, the companies have been banned from a handful of states as these states consider Daily Fantasy Sports to be gambling. However the majority of states still allow the companies to operate within their borders, by characterizing their product as “Games of Skill”.
Contents
Gameplay
Daily Fantasy Sports features contests for a variety of leagues including: NFL, MLB, NBA, NHL, and even less popular leagues like MMA and CFL. [1]
There are two main categories of daily fantasy sports: cash games and tournaments. [2] In cash games player’s who outscore at least 50% of the competition are deemed as winners. These winners receive a payout of roughly double their entry fee. On the other hand tournaments typically pay out only entrants who score in the top 20%. But the tournament prizes often exceed million dollars. [2] [3] In both cases, entrants who are below the winning threshold lose their entire entry fee.
In each of these play styles; entrants assemble a team of professional athletes who have been assigned a cost. These entrants must strategically assemble a team that does not exceed the “Salary Cap” constraint; which is the maximum sum of a team's player costs. [4]
Background of Major Companies
Two companies currently capture 95% of the US daily fantasy sports market: DraftKings and FanDuel. [5]
Major Companies
FanDuel
FanDuel was launched by the web based prediction market Hub Dub in July 2009.[6] FanDuel has raised $363 million in funding.[7] FanDuel has a partnership with the NBA.[8]The New York City based company has most recently been valued at $1.2 billion dollars.[7]
DraftKings
Former Vistaprint Vistaprint executives Jason Robins, Paul Liberman and Matt Kalish established DraftKings in January of 2012 [6] DraftKings has received $776 million in funding.[7] The MLB and NHL have formed partnerships with DraftKings.[8] The Boston based company has most recently been valued at $1.2 billion dollars.[7]
Merger
In November of 2016, FanDuel and DraftKings reached an agreement to merge. Similar regulatory and legal challenges were cited as reasons for the competitors decision to join forces. [9] DraftKings Chief Executive Jason Robins will serve as CEO of the new company, while FanDuel chief Nigel Eccles will be chairman.[9] Robins stated that merging will allow the companies to pursue innovative ideas by freeing up capital.[9] Pending approval by the Federal Trade Commission, the merger will likely close in late 2017.[9]
Data Scandal
In October 2015 a DraftKings employee, Ethan Haskell, won $350,000 in a FanDuel contest. Haskell earned this prize by placing second in FanDuels’s NFL Sunday Millions contest. [10]
It is believed that Haskell was able to win these contests, in part, because of his access to player ownership data [10]. This means he may have seen which NFL players had been selected by DraftKings users, and by how many users. This information would have given him an advantage on FanDuel because the two sites work very similarly and typically have the exact same price for each player in a given week.
Company Response
In response to the scandal, DraftKings and FanDuel released a joint statement:
“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.” [10]
False Advertising
The New York attorney general Eric Schneiderman began investigating both DraftKings and FanDuel; after he discovered evidence that the companies were misleading customers through advertisements.[11] Schniederman claimed that the companies’ advertisements led potential players to believe they had a real shot at winning; when few players win money over time.[11]This is centered on the idea that a subset of contestants termed "Grinders", who utilize automated computer scripts and sophisticated statistical strategies, reap massive payouts at the expense of casual users.[12]
Penalities
DraftKings and FanDuel each agreed to pay $6 million to settle the false advertising violations cited by the New York Attorney General.[11] Also FanDuel and DraftKings are now required to provide information about the distribution of winnings on their respective websites.[11] These statistics show that, over the past six months on DraftKings the top 1% of players have claimed 44% of the available winnings. [1]
Legality
Internet Gambling Enforcement Act
In 2006, the federal government passed the Unlawful Internet Gambling Enforcement Act.[13] This Act established fantasy sports as “games of skill” and not “games of chance”. The law says a contest is legal if it:
- (I) Is not dependent solely on the outcome of any single sporting event or any singular individual performance in any single sporting event.
- (II) Has an outcome that reflects the relative knowledge of the participants. [13]
Games of chance v. Games of skill
A game of chance can be defined as a contest where the outcome depends to a “material degree” on an element of chance. [14]. The Supreme Court of Washington has determined DFS to fall under this heading, by ruling “the outcome of a football game may depend on several chance factors including: the physical condition of the athletes; the psychological mindset of the athletes; the weather; and any sociological problems between and among the members of a team”[14]. Furthermore, Gambling is roughly defined as staking or risking something of value upon the outcome of a contest of chance. [14] Sports gambling is illegal in 46 US states [13]
To avoid the title of “gambling”, DraftKings and FanDuel argue that DFS are games of skill. The companies contend that a contestant chooses the players for his/her team by skillfully analyzing player statistics and contestants must also monitor and assess other conditions such as the opposing team’s defense in the real life game, which may factor into an athlete’s production[14] .
Individual State Rulings
States have been divided on this issue. The majority of states currently allow daily fantasy sports to operate within their borders [15] However states of Arizona, Iowa, Montana, and Washington do not allow DFS to be played within their borders [14]. As these states prohibit gambling and have determined daily fantasy sports to be gambling.
References
- ↑ 1.0 1.1 DraftKings Site https://about.draftkings.com/
- ↑ 2.0 2.1 Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments
- ↑ Guaranteed Prize Pool http://dailyfantasysports.codes/basics/daily-fantasy-basics-what-is-a-guaranteed-prize-pool-gpp/
- ↑ Salary Cap Explanation http://venturebeat.com/2015/09/10/how-to-make-a-killer-daily-fantasy-sports-football-roster-on-draftkings-and-fanduel/
- ↑ Advertising Age Publication: http://adage.com/article/media/draftkings-fanduel-spe/300658/
- ↑ 6.0 6.1 History of Daily Fantasy Sports: http://dailyfantasynews.com/the-complete-history-of-the-daily-fantasy-sports-industry/
- ↑ 7.0 7.1 7.2 7.3 Comparison: http://www.legalsportsreport.com/3832/fanduel-or-draftkings/
- ↑ 8.0 8.1 Partnerships http://www.legalsportsreport.com/dfs-sponsorship-tracker/
- ↑ 9.0 9.1 9.2 9.3 Merger Report: https://www.wsj.com/articles/draftkings-and-fanduel-agree-to-merge-1479479405
- ↑ 10.0 10.1 10.2 Scandal Report: http://fortune.com/2015/10/07/draftkings-fanduel-scandal-timeline/
- ↑ 11.0 11.1 11.2 11.3 False Advertising Report: http://adage.com/article/digital/fanduel-draftkings-agree-pay-6-million-amid-false-advertising-claims/306477/
- ↑ How casual users are being tricked: https://www.nytimes.com/2016/01/06/magazine/how-the-daily-fantasy-sports-industry-turns-fans-into-suckers.html
- ↑ 13.0 13.1 13.2 Business Insider Report: http://www.businessinsider.com/why-draft-kings-and-fanduel-are-legal-2015-4
- ↑ 14.0 14.1 14.2 14.3 14.4 University of Cincinnati Law Review:https://uclawreview.org/2016/04/06/daily-fantasy-sports-game-of-skill-or-game-of-chance/
- ↑ Legality Map: https://www.dailyfantasycafe.com/academy/undergraduate/is-daily-fantasy-sports-legal/