Peter Ferentzy (2015) All bets are off: Losers, liars, and recovery from gambling addiction. Journal of Gambling Issues e-View.
doi: 10.4309/jgi.2015.31.2
All bets are off: Losers, liars, and recovery from gambling addiction
Wexler, A., & Wexler, S., with Jacobson, S. (contributor). (2015). Las Vegas, NV: Central Recovery Press. ISBN 978-1937612757.
Peter Ferentzy, Ph.D.
The Centre for Addiction and Mental Health
Abstract
Rarely does a reader come across a text where integrity oozes out from between each line. That is always a treat, and Arnie and Sheila Wexler’s book is one of those. Perhaps this should not be surprising—after all, Arnie brings to the table a half-century of personal and professional experience in recovery from problem gambling (PG). In fact, as a PG scholar who has communicated with Arnie in depth over the years, I can make a claim that few in the field would disagree with: No human being has devoted more time and sweat to this cause than Arnie Wexler. The one exception, perhaps, would be his co-author and wife, Sheila Wexler. I would also be remiss if I didn’t mention Steve Jacobson, contributor, who assembled their narratives into a cohesive, beautifully written story—one in which many problem gamblers and their loved ones will recognize their own lives and struggles.
The authors use the designation “compulsive gambling” when discussing PG, which is favored by Gamblers Anonymous (GA), though generally in disuse by the scientific community. So what? “Compulsive” is just as good a word as “pathological,” “disordered,” or “problem.” Arnie is old school, and even though I disagree with him on many points (sometimes I think that Arnie and I disagree about everything), there is nothing wrong with old-school lingo, or even an old-school approach, so long as other options are present.
Arnie is an old-school gambler and an old-school tough guy, and it shows, even as he challenges ideas such as that drugs and alcohol are more dangerous than gambling. Of course, Arnie was in the game when most people thought just that, despite having a decent grasp on alcoholism and drug addiction. On page 1, Arnie lets you in on how he sees it (and how he sees himself): “I always knew I was going to be a compulsive something or other.” Yes, had the dice rolled just a little differently, maybe Arnie would be recovering from crack and booze (like this reviewer), and maybe this reviewer would have a history of compulsive gambling. No one can say for sure, and Arnie understands that truth with as much clarity as any researcher with whom I have worked.
The book is laden with sophisticated takes on complex issues (e.g., Arnie comes out as an agnostic with respect to PG etiology) and some really glaring generalizations (e.g., the “mindset” of the compulsive gambler is discussed with sweeping statements). So, on the one hand, Arnie understands how difficult it is to pin down causation and that, even if it were possible, the account would vary from one person to the next. On the other hand, he often claims that all compulsive gamblers think this way and that way. Even if many of these generalizations were true in the vast majority of cases, they could never apply to each and every one.
Let us recall, though, that the book is more experiential than scientific. Arnie often makes personal statements, and with full regard for how they are personal. So even though gamblers—according to 12-Step lore—are said to dream about yachts and such, Arnie apparently was an exception to that rule: “Most people who buy those $100 million lottery tickets enjoy a few moments daydreaming about what they’d do if they won: pay off the mortgage, buy a new house, a new car…. Not me. Nope. I just thought of paying off gambling debts and having some money left over to bet even more. That was my fantasy” (p. 8).
As gamblers go, Arnie was as pure as they come: “when I had a good day betting, I was so high I didn’t need sex” (p. 31). Sheila concurs: “Arnie wasn’t interested in making love” (p. 37). Later, she elaborates on this singular drive: “Over the years, I learned to understand the grip his addiction had on him. Even when he knew he was going to lose, he had to make a bet” (p. 40). After Arnie stopped gambling, so ended the high, and the book covers the struggles he encountered during those early years of his recovery, especially the depression. For his wife, the greatest struggle appears to have been finding the strength to forgive her husband. The two perspectives play off each other throughout the entire book, generating a dynamic that made me feel like I was a part of their reality.
Even after decades in recovery, Arnie explains how he is still an addict and therefore must always be vigilant. To illustrate, he tells the story about a time he was playing golf, and was surprised by a sign that greeted him at the second hole, advertising that a hole-in-one would win him a car. “I was shaking like a leaf as I addressed the ball. I was afraid to take a swing. I ‘accidentally’ knocked the ball off the tee, so…I was shooting for a hole in two…. I was safe” (p. 104).
This book will walk you through the world of GA in all its specificity, vis-à-vis other 12-Step programs. For example, in Alcoholics Anonymous, the fourth step involves taking a moral inventory, but in GA one needs to do a moral and financial inventory (p. 102). Arnie is not entirely uncritical of the 12-Step model, however, and freely expresses his disdain for the anonymity insisted upon by the fellowship. That statement, in itself, amounts to heresy in the 12-Step world, but Arnie feels strongly that disclosure is essential: Gamblers should stop hiding.
That’s what Arnie thinks, and he says what he thinks.
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All bets are off: Losers, liars, and recovery from gambling addiction
I would like to concur with Peter’s review of Arnie and Sheila’s book. Arnie’s a straight shooter who calls them like he sees them; no pretentions, just honest sincerity in trying to share their story and help people overcome a gambling problem. Arnie and Sheila’s commitment can’t be challenged, they continue to work with young and old, understand the pain that accompanies a gambling problem, and work tirelessly with individuals experiencing problems.
Arnie is clearly amongst the greatest storytellers of all times (young clinicians and academics would be wise to sit next to Arnie or Sheila at a conference to get a historical perspective of the field from people who were there at the beginning). They continue to be in the trenches receiving calls at all hours from anyone in need of help and do their utmost to assist in any way possible. In every discussion with Arnie I always learn something new.
Thanks Arnie and Sheila!
Jeffrey L. Derevensky, Ph.D.
McGill University
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I was going to jump in and say the same thing, Jeff — I loved this review.
I thought that Peter did a really nice job of conveying the beauty of Arnie (and Sheila!) as we’ve all come to know and admire them — and occasionally, as we’ve probably all done in this incomparable forum at one point or another, disagree with them! — in an effort to help alleviate the suffering of problem gamblers and their families.
Well done all ’round.
Bo
______________________________
Bo J. Bernhard, Ph.D.
Executive Director
UNLV International Gaming Institute
Professor
UNLV William F. Harrah College of Hotel Administration and UNLV Department of Sociology
Mail: 4505 S. Maryland Parkway Box 456037
Las Vegas, NV 89154-6037
Seven-figure paydays, complex statistical algorithms, congressional inquiries, suspicions of insider info, and yes, all those advertisements. Daily Fantasy Football’s main competitors—FanDuel and DraftKings—are now entwined with the NFL experience. But with multiple controversies converging at once, will it stay that way?
Editor’s note: FanDuel is a sponsor of The MMQB. This piece was pursued and executed independent of that business relationship. Sports Illustrated, the parent of The MMQB, has a partnership with DailyMVP, another daily fantasy sports provider.
BOSTON — Saahil Sud, perhaps better known by the screen name “maxdalury,” welcomes me into his apartment with a soft hello and a handshake. It’s not until much later that he reveals that the 24th floor penthouse, with a breathtaking view of Downtown Boston, was previously rented by Rajon Rondo of the Celtics. I follow him to his computer lab with a couch, some choice Yankees and Rangers memorabilia from the ’90s, three computer screens and two flat-screen TVs.
This two-bedroom condo is where Sud, 26, made north of $1 million during Week 3 of the NFL season playing daily fantasy football.
Analytics go a long way for the Amherst College grad, who expects to gross more than $5 million this year as the top-ranked Daily Fantasy Sports (DFS) player in the world (according to RotoGrinders.com). But intuition is the icing on the cake. In Week 3, Sud, who enters hundreds of lineups every week, chose Packers receiver Randall Cobb in all of his lineups—a rare move for a DFS pro, and one that carries a big risk considering the unpredictability of a single-game performance by a single player. Sud reaped the rewards after Cobb grabbed seven catches for 91 yards and three touchdowns on Monday Night Football.
Sud calculates the decision to feature Cobb was worth seven figures. “I usually go with analytics, but I also take more risks than others,” Sud says. “I know that this was the right decision to maximize my profit, as long as I am comfortable with the risk.”
Meanwhile, Cobb, who received a long-term contract befitting a star receiver this past offseason (with most of it loaded into bonuses), likely got in the neighborhood of $100,000 (base salary plus game-day roster bonuses), before taxes, in his weekly paycheck. Told of Sud’s windfall after a Packers practice this week, the fifth-year wideout was incredulous.
“What? Hey, man, I’ve got to start collecting my money from these guys,” he joked. “If I’m on your team and I’m making you money, I need a paycheck for that. Help me out, man!”
Everybody, it seems, wants a cut of the millions of dollars changing hands in this budding, newly visible and, up until now, barely regulated world of daily fantasy sports. Yet DFS finds itself at a crossroads. As ads from the industry’s top two competitors, FanDuel and DraftKings, have inundated the airwaves during the first month of the NFL season, challenges to DFS’s legality (most states do not consider DFS gambling) from lawmakers threaten to slow the massive, seemingly endless cash flow. Some would-be players have shied away, intimidated by the statistical skills and large capital of pros like Sud. And a new threat, one originating within the walls of the two competing companies, has shaken confidence in the fairness of the games themselves.
FanDuel and DraftKings are now each valued in the neighborhood of a billion dollars, and are backed by the NBA, MLB, major broadcasters and some NFL owners, among others. Half the teams in the NFL also have advertising deals with DFS sites. Recent developments raise the question: Has DFS grown too fast for its own good, or just fast enough to survive?
* * *
About 200 yards from Sud’s apartment is the red brick office building that houses the DraftKings offices. It’s visible from Sud’s living room.
He swears it’s a coincidence; and jokes that the DraftKings bosses think he’s plugged into their office wifi.
But to see why the industry finds itself embroiled in controversy, DraftKings need look no further than its own office. Eyebrows were initially raised during Week 3, when DraftKings content manager Ethan Haskell inadvertently posted data on ownership trends for the site’s Millionaire Maker contest before all games had begun (and therefore, all lineups for all games had been locked). Ownership data is hugely valuable in DFS; from a strategy standpoint, it’s important to field a unique lineup—the fewer competitors that own a player, the more value a big performance will carry.
Haskell apologized for the mix-up and reiterated that, while he had access to the data, as a company employee he was prohibited from entering the contest.
However, Haskell was not prohibited from entering a similar contest at rival FanDuel, where he played DFS contests regularly, and where, because of similar pricing algorithms, ownership rates are often similar. Haskell has insisted that he did not use the DraftKings data to make his FanDuel entry, and the company says he didn’t have access to the data until 40 minutes after his FanDuel lineup was locked. But the optics were undeniably bad when The New York Times reported that Haskell placed second out of 22,989 entries in the FanDuel contest, taking home a prize of $350,000 on his $25 entry.
Major League Baseball, which has a stake in DraftKings, echoed the thoughts of many DFS participants: They did not think DFS site employees, some of whom presumably have access to valuable inside information, were permitted to play DFS at any site. According to ESPN, FanDuel said 0.3% of their prize money had gone to DraftKings employees—estimated to be around $6 million.
A top official at an online sports book, when briefed on the structure of FanDuel’s anti-fraud unit: “Let’s just say we have a significantly larger unit in place.”
The incident raised questions about the industry’s ability to regulate itself and prompted the sites to release a joint statement Monday promising a commitment to the “integrity of the games we offer.” Both companies immediately banned employees from playing DFS at any site, and have since said that prohibition will be permanent. Both companies also initiated third-party audits of their procedures.
New York State Attorney General Eric Schneiderman announced that his office planned an inquiry into both DraftKings and FanDuel. Massachusetts Attorney General Maura Healey plans on pressing both companies for additional consumer protections. California state assemblyman Adam Gray called for an informational hearing on the industry. ESPN went so far as to—at least temporarily—pull DraftKings-sponsored elements from its programming (the network continues to run traditional DFS advertisement).
Yet, DraftKings CEO Jason Robins, in an interview with The Boston Globe, bristled at the suggestion of government regulation, calling DraftKings a “very ethical company.” FanDuel declined comment on the issue of regulation.
Two days before news of the scandal broke, I visited the Manhattan office of FanDuel, where more than 40 staffers plugged away at computers. FanDuel has other offices in the U.S. and in the U.K. as well, with more than 400 employees.
Co-founder and VP Tom Griffiths said their fraud prevention team consists of six employees. The group is run by a former law enforcement officer and staffed with lawyers and ex-DFS players who investigate possible discrepancies.
That unit will surely have to grow. The MMQB reached out to several top online sports books, most of whom declined to disclose details about their security or anti-fraud teams, and how they might contrast to those in DFS. One top official at a well-known sports book said there really isn’t any confidential information in the sports-betting community that would give industry employees an advantage. Another, when briefed on the structure of FanDuel’s anti-fraud unit, said, “Our security team’s purpose doesn’t exactly compare to daily fantasy sites, but let’s just say we have a significantly larger unit in place to ensure online gaming is both fair and safe for all participants.”
* * *
Photo: Michael J. LeBrecht II for Sports Illustrated
FanDuel co-founders Nigel Eccles and Tom Griffiths.
New employees at FanDuel—and there are plenty these days—are greeted with green and silver balloons affixed to their swivel chairs that read: First-round draft pick.
That unassuming office at Union Square is where those suddenly ubiquitous daily fantasy ads that have been crop-dusted across your Sundays—the ones with the lightly-bearded, jockish-looking pitchman shouting million-dollar payouts into your subconscious—were hatched. A who’s who of major corporations, including Comcast, Turner, Time Warner and Google, invested some $363 million so that FanDuel could become the No. 1 advertiser in the country this fall.
The strategy, which has brought a host of positive and negative consequences for both FanDuel and DraftKings, is rooted in the old StubHub game plan. The online ticket-buying industry sprouted around the turn of the century (and the once-shady often illegal practice of “ticket scalping” became the above-board “secondary ticket market”). The sites we now know as the biggest names in that industry spent well beyond their means to advertise all over the map in order to dominate the market.
“You have to capture the mindshare first,” says Griffiths.
Born in Liverpool and schooled in Edinburgh, the 33-year-old knew next to nothing about American football when he and five friends huddled in 2009 to decide what to do with their middling news prediction site, Hubdub.
Says Griffiths: “There was a moment when we realized, ‘Holy s—, I don’t think our current product is going to work.’ ”
They rented a house in Austin to attend South by Southwest, the film, media and music festival that attracts entrepreneurs every March, and they gathered one day in the backyard and brainstormed for specific avenues to focus their online contests. They wrote their ideas on post-it notes, stuck them to the wall of a tool shed, and debated the possibilities.
The Unlawful Internet Gambling Enforcement Act of 2006 was a death knell to the world of online poker but provided for the continuation of traditional fantasy sports. There hadn’t been any evolution in fantasy sports since the games went online, and the founders resolved to change that by tapping into the attention-deficit generation with weekly and daily fantasy sports.
Fast-forward six years and FanDuel payouts are the largest they’ve ever been. The industry at large is estimated to generate $2.6 billion in entry fees this year, according to Eilers Research.
People are annoyed with the ads, and Griffiths gets that: “People are complaining about how often they are on. So we’re looking at refreshing the creative and changing it up so people aren’t bombarded with them.”
The marketing push came with one more unintended, and unwanted, consequence.
“Now [the NFL has] invested in fantasy sports,” Congressman Pallone says. “They’ve carved out a niche so they can make money and prohibited everybody else from doing it.”
DFS consists of two major kinds of contests (and there’s probably a promo code just for you!). In a football head-to-head game, for instance, players can draft a team from a pool of about 500 NFL players with an allotted portion of cash. A user is given a salary cap and each NFL player is afforded a salary determined by the site. Your lineup then goes up against another user, typically chosen at random, with the entry fee ranging anywhere between 25 cents and $1,000 depending on how much you chose to wager. A tournament follows the same rules, but the pool of users is much larger, and more than one person wins. In some tourneys, the top half of players who enter get something, if not all their money back. FanDuel says seven out of 10 new users eventually win.
This much was explained to viewers in a series of commercials that accompanied NFL games during the first week of the season. One of those mini-infomercials caught the eye of a congressman from New Jersey, democrat Frank Pallone of the state’s sixth district. Fantasy sports had once existed in the good graces of the law as a provision in the UIGEA of 2006, a tack-on to a counter-terrorism bill backed by an NFL-appointed lobbyist and passed in the final hours of a congressional session.
But now Griffiths and his ilk are flashing too much money for Pallone and a handful of legislators across the country who liken daily fantasy to sports betting and want both practices regulated and taxed.
“The tipping point was a few weeks ago when they started spending millions of dollars on advertising,” Pallone told me in a phone conversation during his Amtrak trip between New Jersey and Washington. “I watched one infomercial on Monday night that basically explained to you how to play. The teams are supposedly so concerned about sports betting they don’t want it legalized, but they’re [running] infomercials for fantasy?”
In 2011, Pallone successfully campaigned for a referendum allowing sports betting in New Jersey on the promise tax revenues could revitalize places like Atlantic City. State leaders argued they were not in violation of the federal Professional and Amateur Sports Protection Act of 1992, which limited sports betting to Nevada, Oregon, Delaware and Montana. The NCAA and the four major professional leagues sued to prevent the implementation of the state law, and the U.S. Third Circuit Court of Appeals in Philadelphia affirmed the federal ban in 2013 and again last August, striking down New Jersey’s vote.
FanDuel has advertising agreements with 16 NFL teams, and while teams are not permitted to invest in DFS companies, individual owners are. (Jerry Jones and Robert Kraft have stakes in DraftKings.) It’s with good reason. In surveys of users, FanDuel found that DFS participation resulted in 40% more consumption of NFL games, on average. Users went from consuming 17 hours of football and football-related media per week to 24, on average.
“Now they’ve invested in fantasy sports,” Pallone says. “So they’ve carved out a niche so they can make money and prohibited everybody else from doing it.”
Roger Goodell answered a question about the legality of DFS during a press conference on Wednesday.
“States are the ones that make the determinations about whether something is legal or not legal. We feel that a cautious approach is the right way, but we’re protecting our game. Daily fantasy—it’s hard to see the influence that it could have on the outcome of a game because individual players are picking different players from different teams, mashing them up, you might call it, and it’s not based on the outcome of a game, which is what our biggest concern is with sports betting. So our position continues to be that way, but we recognize some states consider it legal, some don’t, and we’ll follow that law and make sure we do.”
Pallone last month called for a congressional review of fantasy sports in relation to gambling, the natural end game being a justice department inquiry into the legality of DFS. At issue is the UIGEA provision that gaming online must require more skill than chance. In many states, that requirement is more stringent. In Arkansas and Tennessee for instance, two of the 45 states where FanDuel and DraftKings currently operate, any element of chance whatsoever is illegal. Legal experts agree an argument could be made that betting on football players who compete at the whim of weather patterns and injury constitutes a considerable degree of chance.
FanDuel, with its abundant coffers, recently commissioned M.I.T. for a yet-to-be-released study that, according to Griffiths, will demonstrate the substantial amount of skill involved in fantasy games.
“With horse racing, you’re picking from a field of eight,” he says. “With us you’re picking nine players from a field of 500. We had the university calculate the number of possibilities; there’s over a trillion. We see the top users repeatedly win, not because they play so many games, but because they have a higher point distribution. Choice equals skill.”
* * *
Photo: Ronda Churchill for Sports Illustrated
The leaderboard at the 2014 FanDuel World Fantasy Football Championships last December.
Marc Edelman began studying fantasy gaming shortly before he was assigned the country’s first law course on the topic, at Barry University Law School, in central Florida, in 2011. He translated his course notes into an article for Forbes, and now teaches the same course at Baruch College in Manhattan.
A fantasy player in the traditional sense, Edelman became fascinated with the sprawling path of the industry. American laws in their complexities and hierarchies and imprecision don’t have a clear answer for DFS, which is one of the reasons power hitters like ESPN, a major provider of traditional fantasy games, have yet to go all-in on the industry.
“Current federal and state law is ambiguous about the legality,” Edelman says. “Certain formats are likely legal in certain states, and certain are illegal everywhere, and certain are legal almost everywhere.”
The ambiguity has allowed FanDuel and DraftKings to flourish with near impunity, much like StubHub once did. Now, if ESPN were to jump in, Griffiths says, it couldn’t make a dent: “I think if they could’ve done that two years ago they could’ve beaten us, but the stage and scale we’re at now, six years old, paying out $2 billion… whoever joins [the industry], we’re not too worried.”
The uncertainty that keeps ESPN out also encourages startups to follow in the major players’ footsteps. Last month two Columbia students made news for dropping out of school and collecting $2.2 million in investments for their own DFS venture, Draftpot. There isn’t a clear blueprint for startups like Draftpot, because there aren’t even agreed-upon standards among the top two rivals. DraftKings, for instance, seemingly flouts a UIGEA provision that fantasy games must involve multiple contests, i.e. a week’s slate of NFL games. They offer NASCAR and PGA fantasy matchups. (“Golf and NASCAR are legally aggressive,” Griffiths says. “We don’t need to take that risk.) And before this week’s scandal, despite heavy scrutiny from the Massachusetts attorney general, Robins recently participated in a panel discussion on whether or not fantasy sports is gambling at a gaming conference in, of all places, Las Vegas, leaving some in the industry to wonder if the one of the biggest names in DFS is putting the cart before the horse.
“Words like ‘tournament,’ ‘jackpot,’ ‘head-to-head,’ it all feels very much like poker,” says Fong, a leading expert in gambling addiction. “It can potentially be very addictive.”
A legal challenge is coming, and Edelman believes the industry will then face a crossroads that has a precedent.
UIGEA sent online poker into the closet and off of your television screen in the years following its passage. Less than a decade earlier, the online ticket-buying startups faced a similar threat but flourished. The big difference? Poker had few institutional allies. StubHub, like FanDuel and DraftKings, partnered with a bevy of influence-wielding sports leagues and teams.
“On one hand, you take online poker. When they began advertising congress cracked down on them.” Edelman says. “On the other hand, one could look at the model of a company such as StubHub, which was once perceived as being illegal ticket sales, but in time was able to build partnerships with the sports league and build legislative change that saved the industry.”
* * *
Lost in this discussion of advertising budgets, legalities and league partnerships is the human toll of DFS. For every Saahil Sud, there are untold hundreds of who sign up and lose, with the potential to lose big.
Six years ago, Arnie Wexler was running a treatment center for gambling addicts in West Palm Beach when the first case of an impending pandemic hit his doorstep. Ralph (not his real name) didn’t believe he was an addict; he called himself a poker pro and boasted of playing real poker on television, but his wife threatened to leave him if he didn’t stop gambling online.
“We had an explosion,” Wexler says. “All these young kids were saying, ‘I don’t need to go to college. I am going to become a poker professional and make a lot of money.’ A lot of those kids today are in recovery programs.”
Neither Wexler nor Dr. Timothy Fong, a leading expert on gambling addiction, have seen the first wave of DFS addiction cases yet, but it they expect to.
“It usually takes about two years after the boom to start seeing people who have lost their jobs or their families as a result of addiction,” says Fong, Associate Clinical Professor of Psychiatry and Biobehavioral Sciences at UCLA and co-director of the school’s Gambling Studies Program.
Fong says the language and graphics used to promote DFS is strikingly similar to that of poker during its heyday.
“Words like ‘tournament,’ ‘jackpot,’ ‘head-to-head,’ it all feels very much like poker,” he says, “Similarly, you can keep hunting for games and pour endless hours of strategy into the games. Anecdotally, we know the same people who were playing poker are now playing fantasy. It can potentially be very addictive.”
The new obstacle, Fong says, is the restoration of consumer confidence after the insider info scandal. Naturally, it’s difficult to attract new users if games aren’t perceived to be on the level. But online poker faced similar skepticism at the onset, when confidence in internet financial transactions was lower than it is today and many users wondered if the poker rooms were full of bots instead of people.
“People didn’t trust it at first,” Fong says, “but then they started winning games and winning jackpots and the sites marketed that and built confidence. The payouts were there.”
Wexler, who founded a national gambling addiction hotline (1-888-LASTBET) after quitting gambling 47 years ago, successfully pushed in 1996 for New Jersey’s legislature to require all casino ads to carry the warning, “if you have a gambling problem, call this number.” DraftKings and FanDuel do not carry such warnings on their sites (naturally, because it would be an admission that this is, indeed, a form of gambling), and permission to sign up requires only an unverified birth date and a credit card. The ease of online gaming is what concerns Wexler, and what led to online poker addicts constituting a third of all calls to his hotline several years ago.
“You want to go to a racetrack or a casino, you have travel, put gas in your car,” he says. “Now you have Internet gambling and this is an impulse disorder. You got gamblers that wake up in the middle of the night and they can go sit at their computer in their birthday suit and lose everything.”
Wexler says he’s phoned Congressman Pallone’s office three times in the last week and sent a letter offering his help in having fantasy games defined as gambling and regulated. (He hasn’t received a reply.) Of course, their interests don’t quite align. Wexler wants the games regulated for public health reasons; Pallone will happily tell you his biggest concern is the potential financial benefit to the state of New Jersey.
“They have extended fantasy beyond the law,” Pallone told me on the phone. “Nobody was making money on it when it was a bunch of guys sitting around a living room drafting players.”
* * *
Photo: Robert Klemko/The MMQB
Saahil Sud, aka “maxdalury.”
Back in Boston, the losers and the addicts concern Sud to the extent that their losses don’t poison the well. That’s because he started out as one of the losers.
Four years ago he tried out daily fantasy on a whim. He entered a $100 head-to-head college football fantasy game and drafted Michigan phenom Denard Robinson, the LSU defense and several other stars. His opponent picked no-names and a few Texas A&M role players, and promptly trounced Sud. Fresh out of Amherst with a degree in math and economics, Sud realized simply being a dedicated fan wasn’t good enough to get rich; this was a math problem more than anything. Anticipating he might one day value his privacy, he picked a screen name that was only tangentially related to himself.
Max Dalury—the real Max Dalury—also lives in Boston and does not earn millions playing DFS. He was a squash player at Tufts whom the 5-foot-9 Sud had battled numerous times previously in high school in Brampton, New Jersey. (“I don’t even know why I chose his name. I don’t know what I would do if I saw him on the street. I’d be like, ‘Sorry man!’ ”) Nowadays the real Dalury’s online footprint is shadowed by maxdalury chatter among the DFS blogosphere.
Sitting on his couch in the lab, I asked Sud why he chose to do an interview with me, forfeiting whatever shred of anonymity he held onto after numerous blog posts and stories revealed his true identity in recent months.
“I wanted to clear up some misconceptions,” he says.
He refers to a Bloomberg article from Sept. 10 quoting Sud sparingly and carrying the headline, You Aren’t Good Enough to Win Money Playing Daily Fantasy Football: Is that a problem for DraftKings and FanDuel?
The article highlighted the many ways pros like Sud use complex analytics programs and programming scripts to optimize lineups and enter hundreds of games per day. According to data collected by Rotogrinders for Bloomberg, “the top 100 ranked players enter 330 winning lineups per day, and the top 10 players combine to win an average of 873 times daily. The remaining field of approximately 20,000 players tracked by Rotogrinders wins just 13 times per day, on average.”
“One could look at the model of StubHub,” Edelman says, “which was once perceived as being illegal ticket sales, but in time was able to build partnerships with the sports league and build legislative change that saved the industry.”
FanDuel and DraftKings walk a tightrope in this regard. Both have introduced games that are off limits for veteran players, allowing first-timers to compete with one another, and both sites have capped entries from the same user to large tournaments, but both sites also capitulated to pros who run scripts that allow them to adjust multiple lineups rapidly in response to, say, a change in weather patterns. Sud takes issue with the popular notion that sharks don’t know when to hold back. He says he stays away from $1 games, which are usually populated by woefully inadequate novices and can be very profitable for pros, and he doesn’t initiate head-to-head games (occasionally players invite him to a game for the novelty of it, something like wanting to sit at a poker table with Phil Ivey). He believes the biggest challenge facing daily fantasy would be a perception that minnows can’t win.
“One of their biggest issues is if you put in $10 and you lose right away, you don’t want to come play again,” Sud says. “On DraftKings people can block me in head-to-head games. It makes sense from the company’s perspective. I want to make as much money as I can within the bounds of the ecosystem. I think there’s some type of line there where I know it’s not good for the long-term future if I cross it.”
One of the pitfalls of online poker was the unchecked opportunity for sharks to feed on novices. Wexler’s first online poker addict, Ralph, described coordinating with two or three friends to join the same online rooms and coordinate their bets over cell phones, leaving the fish at a distinct disadvantage. In DFS, it’s not that simple. Griffiths is confident that any two accounts running similar algorithms or fielding similar lineups can be detected.
“We have complete control over who sees what contest, and I think we’ll have more controls,” Griffiths says. “We limit those guys who play and win a lot because we care about the health of the ecosystem.”
But very few people possess the skills, talent or dedication to win like maxdalury. He doesn’t own a car, spends eight hours a day programming during the offseason, watches sports religiously on two different TVs in-season, and splurges only on vacations with his friends or girlfriend (Las Vegas, Colombia, Belize and Jamaica so far in 2015).
Sud shows me the output of the program he’s built to beat the game. By pulling in data from box scores, weather sites, analytics sites like Pro Football Focus and using his own intuition, he says he’s risking about $140,000 a day and profiting 8%, with outliers like Week 3 in which he clears six figures. He estimates that he loses money on 30% of days.
His mom doesn’t understand DFS. His dad does. Both would rather he get rich doing something else, but this isn’t a point of contention as long as he’s winning. Wearing a cornflower-blue dress shirt with a rumpled collar and some ratty old tennis shoes, he doesn’t seem much different from the kid who blew $100 on Denard Robinson and the LSU defense four years ago. His bank account, however, indicates otherwise.
“People say guys like me bastardized fantasy,” Sud says, “I’m sure that people have said the same thing about the stock market when algorithmic trading came out. They’re cheating. I can understand where they are coming from, but any time there is money to be made, people are going to find the fastest and smartest ways to do it, whatever way that is.”
The same can be said for two companies that emerged seemingly from nowhere in the past few years to exploit an untapped market. For better or worse, the involvement of the most powerful entities in sports—the leagues and the broadcasters—has provided FanDuel and DraftKings with the means to get where they are today. But this is now uncharted territory in a fast-moving industry with billions of dollars at stake. And no one knows where it’s headed.
Kalyn Kahler and Emily Kaplan contributed reporting to this story.
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Mark thought he had the right approach. He did his homework, studied winning strategies and went against the grain. And he even won his fair share of contests. But he kept chasing a big pay day, and things spiraled out of control.
Eventually, when he stepped back to see the carnage, the 43-year-old firefighter from Florida says he’d lost about $20,000, all on daily fantasy sports.
“I have so much guilt and regret,” said Mark, who asked that his name not be used. “Now that the fever’s kinda broke and I’m looking back at how much damage I’ve caused to myself and my family, it’s something I wouldn’t wish upon anyone. It’s just awful.”
Mark began playing daily fantasy sports (DFS) prior to the 2014 NFL season and continued with NBA and MLB until a few months ago. He’d seen commercials with testimonials from winning players and thought he could turn his knowledge of sports into cash.
Like many Americans — an estimated 56 million that play fantasy sports — Mark had found a hobby. But that hobby, while legal, became destructive and addictive.
The operators don’t view their games as gambling. It’s allowed them to stay legal and get involved with the American professional sports leagues. FanDuel did not respond to interview requests for this story. DraftKings said in a statement ”fantasy sports contests are games of skill that allow players to exert their skill to create winning lineups.”
“It’s facile and easy for people to just lump fantasy sports together with gambling, but it’s not a fair thing to do,” said Glenn Colton, an attorney and spokesperson for the Fantasy Sports Trade Association. ”The law is what it is, and Congress has spoken and has said, quite correctly in my view, that fantasy sports is not betting or wagering.”
A game of skill can be addictive
Plenty of people deposit money on a site like DraftKings or FanDuel, the overwhelming market leaders. They enter a few contests, lose their money, and then quit.
But Mark’s compulsive behavior cost him a chance to set up college funds for his three children, all under 10 years old. He works a construction job when he’s not at the firehouse to pay off credit card debt he racked up playing DFS. In about 18 months, when he’s paid it off and doesn’t have to hear his 7-year-old son ask why he has to go to work all the time, he can exhale — but will then go back to work to get ahead and actually save some money for his kids.
His family was on a tight budget to begin with, and now, it’s nearing disaster.
“(My son is) trying to go in his piggy bank and give me money so I wouldn’t have to work,” Mark said.
DFS operators argue their games are ones of skill and not gambling, and the numbers do back that up. From Bloomberg:
The market is dominated by a small percentage of “sharks,” many former financial professionals and poker players. They’ve built statistical models to create hundreds of optimal lineups per week and while there’s always variance, these players dominate the field long term. Their investment strategies resemble those a hedge fund operator would understand, not your average sports fan.
This non-gambling stance by DFS operators has allowed them to foster lucrative partnerships with the American sports leagues and the NCAA, though those bodies have long been opposed to legalized sports betting, saying it affects the integrity of the game.
But at their core — wagering money on an uncertain outcome — DFS is gambling, says Timothy Fong, co-director of UCLA’s Gambling Studies program.
“It’s putting lipstick on a pig,” Fong said.
“It has all the same characteristics as other forms of gambling that create addiction. It’s fast. It’s anonymous. It’s accessible. You can lose and spend unlimited amounts of money on it. It has all the hallmarks of online casinos.”
Arnie Wexler, a compulsive gambling counselor in New Jersey, says the same. So does Kenny White, a former Las Vegas oddsmaker. So do New Jersey legislators Frank Pallone and Ray Lesniak, who want to see traditional sports betting legalized for the benefit of their state.
And so does Mark, who’s lived two different hells.
Mark, a four-year army veteran, first bet on sports against a point spread in the late 1990s. He lost “about $4,000-5,000” to a D.C.-area liquor store owner turned bookie, but eventually paid it off.
Then in 2008, he lost more than $10,000 to an offshore sportsbook, betting everything from pro football to eastern European soccer.
“I kinda tricked myself,” he said, “that (DFS) was different from against-the-spread betting.”
The FSTA, which represents the industry, says on its website that “managers must take into account a myriad of statistics, facts and game theory in order to be competitive” and must also “take into account injuries, coaching styles, weather patterns, prospects, home and away statistics, and many other pieces of information in order to be a successful fantasy sports manager.”
But many of the same processes are used to bet sports, says White, who set lines in Vegas for more than two decades. DraftKings CEO Jason Robins said on “Outside the Lines” Wednesday that picking against a point spread will result in roughly an even split, making it chance-based.
“To beat sports betting is a skill. And the fantasy games are a skill,” White said. “But you go on DraftKings and go head to head (with) somebody for $5,000. … That’s gambling.”
That accessibility is what makes these games so dangerous, says Wexler, who has been helping compulsive gamblers for more than 40 years. A player can create a lineup for cash in under a minute.
“What addicts compulsive gamblers is quick, fast action,” Wexler said. “You wake up in the middle of the night, and you’re gambling.”
All you need is a credit card and an email address. The minimum age is 18, but there’s little verification needed on many sites upon registration. Using a pre-paid Visa giftcard, easily obtained with cash at a convenience store, a 13-year-old can create an account.
Wexler runs a gambling hotline 888 LAST BET and says he hasn’t treated any fantasy players yet. He said after an industry booms, calls roll in six months to a year later.
Because their legality depends on not being classified as gambling, DFS operators offer nothing on their sites to help problem gamblers. Seth Young, COO of StarFantasy, says that’s in the works for his company.
“There’s no reason for us not to do it — it’s not going to hurt,” Young said. “For us, I think it’s just a social responsibility thing.”
Mark emailed FanDuel in March asking them to ban his account and blacklist him from rejoining after he accrued that massive debt and was shamed by his wife and her family, which had heard all about this debt. The company did so. He then signed up at DraftKings shortly after.
Last week, Mark received emails from FanDuel telling him about promotions and new games the site is offering.
His wife, who nearly left him and now has 100 percent control of the family’s finances, doesn’t believe he’s quit.
Somebody’s winning, right?
Daily fantasy sports are parimutuel, meaning all players are competing in a pool against one another. The operator then takes a rake. So a player is trying to beat his peer, not a house or bookie. Some do it often.
Cory Albertson calls the DFS/gambling argument a meaningless one. The 31-year-old who makes a living playing daily fantasy sports says lawmakers should focus on regulating the industry to make sure it’s safe and enjoyable for everyone. He also believes some pools should be segregated to keep novices away from experts.
With a partner, the former online poker player and Notre Dame MBA graduate has made thousands of dollars playing DFS. To him, gambling is a spectrum that includes everything from options trading on Wall Street to poker.
Albertson enters close to 1,000 lineups on an NFL Sunday. He won’t say how much he invests or has won, but is among the “sharks” dominating the field.
Albertson is busiest on Saturdays, when he adjusts his projection models to reflect injuries and the latest news. Then on Sunday, he spends time with his girlfriend.
With a positive expected value system that will make him money long term, Albertson doesn’t have to (and can’t) follow every lineup. He has rooting interests — like if a player he owns in 10 percent of lineups is only owned by four percent by other players — but it’s largely a big-picture investment strategy.
“I’m just a guy with a laptop,” Albertson said. “The skill aspect is being able to organize that info intelligently and sift through the noise to find the signal and make the best decisions you can when you’re making your lineup.”
Kicking a habit
Mark is a guy with a laptop, too. He just couldn’t make responsible decisions with his bankroll. While Albertson tries to occupy a carefully-calculated percentage of the DFS market as it grows, Mark chased the money.
When his wife, whom he married in 2005, discovered Mark had cost the family $20,000, she took complete control of their finances. She had enough after Mark’s two run-ins with compulsion and gambling-related debt. And she “absolutely considers” DFS gambling, he said. If he’s caught playing again, she’ll be out the door that day.
Last month, Mark couldn’t avoid the advertisements of DraftKings and FanDuel. He had been doing tons of research leading up to the season — his wife discovered the debt in August — and didn’t want that work to go to waste.
So at the grocery store several days before the NFL season, Mark used cash back — essentially laundering it, he said — to buy a $20 pre-paid Visa and deposit it on DraftKings. He won $500 in the Week 1 “Millionaire Maker” tournament, the site’s signature contest, by placing 606th out of 572,500 entrants.
But now that $500 is just sitting there. He can’t take it out, because his wife will know he started playing again. So he continues playing.
“As a 43-year-old male, I have no control over my own finances now because the trust level has been destroyed,” he said.
Despite the relapse, Mark says he’s committed to never depositing money again. From 2008-2014 — between his battles with sports betting and DFS — he hadn’t placed money on any sporting events.
“I was a yacht above water and being able to reflect on how bad this is, how horrible this is, I’m just disgusted by this,” he said. “I feel like I will never do it again.”
But that money still sits in Mark’s account, waiting to be played. And it can be played quickly and compulsively
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As daily fantasy eschews ‘gambling’ label, scrutiny grows
Kimberly Pierceall, Associated Press · October 5, 2015 at 8:51 pm
LAS VEGAS (AP) – Stock market traders and chess players – that’s who’s playing DraftKings, according to CEO Jason Robins, who told a crowd of casino executives last week in Las Vegas that fewer than 15 percent of the players on his site make wagers in traditional sports books.
What he didn’t mention was growing online criticism at the time that his site may have allowed activity being likened to insider trading.
Daily fantasy players appear concerned a DraftKings employee who said he accidentally posted data online showing which NFL players were being picked the most for draft lineups for a day’s contest, may have also benefited from the information when he won second place and $350,000 on competing daily fantasy site, FanDuel, the same day.
There’s no evidence that the information led to the employee’s win and a FanDuel spokeswoman told The Associated Press that she did not believe there was an attempt to manipulate the contest.
Both sites posted identical joint statements on their websites Monday saying, “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.”
There’s no mention of what specific policies the companies have in place, but it appears the DraftKings employee was known to compete on other daily fantasy sites. “Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it,” the statements said.
The statements did little to quell questions from fantasy sports players on message boards dedicated to the daily fantasy sports industry and observers who have said the industry was traveling head-long into being regulated.
“It is tantamount to insider trading which would kill the industry,” said Daniel Wallach, a sports betting law expert based in Florida. He said the statements offered more questions than answers.
“It’s essentially, ‘trust us, we’re looking into it,’” he said.
Regardless if insider trading occurred or not, Wallach said the episode highlighted the lack of safeguards in place and had suggested during last week’s Global Gaming Expo in Las Vegas that the industry could be a possible haven for money laundering.
The daily fantasy sports industry has gone to great lengths to distance itself from traditional sports wagering and Robins, the CEO of the ubiquitous DraftKings website, made no effort to get cozy as he sat in front of a crowd of casino executives at the trade show last week.
Robins’ legal stance that daily fantasy sports leagues are not a chance-based gamble has done nothing to tamp down what has become an intensifying national debate around the country.
Many in the highly regulated casino industry insist daily fantasy sports leagues are gambling sites, shouldn’t be treated any differently than traditional sports betting and, as a result, should be regulated.
“Fantasy is real gambling,” said Dennis Drazin, chairman of New Jersey’s Monmouth Park Racetrack, during a panel discussion. “A rose is a rose.”
Meanwhile, a New Jersey congressman has asked for a hearing on the legal status of daily fantasy sports, the commissioner of the NCAA’s Southeastern Conference has barred daily fantasy site ads on the SEC Network, and the casino industry’s American Gaming Association is looking into the industry as part of a broader look at legalizing sports betting beyond a few states.
“If it’s gray, our job is to make it black and white,” said Geoff Freeman, the association’s president and CEO. He said the casino industry sees fantasy sports as a potential partner “to grow both of our businesses.”
Robins cites an exemption in a 2006 federal law for fantasy sports that he believes allow his site and others including FanDuel to offer contests that normally spanned an entire season down to a single day. The NFL agrees with their legal stance.
The debate comes as the websites have flooded the airwaves with commercials in recent months touting how average fans became overnight millionaires by playing daily fantasy leagues. Daily fantasy sports allows online players to pick a roster of point-earning players from various teams for a single day of competition and win money, in some cases $1 million.
Observers, though, believe that after spending hundreds of millions of dollars on advertising during football games, the spotlight on the daily fantasy sports industry may ultimately lead lawmakers and regulators to keep a closer watch.
On the question of possible money laundering, DraftKings referred questions to a statement from the Fantasy Sports Trade Association that said the sites have “instituted monitoring systems to identify and prevent fraudulent or suspicious transactions.”
Signing up for a DraftKings account involves choosing a username, providing an email address, clicking a box that says the person is older than 18 or 19, depending on the state, and providing credit card information. No other identification is sought.
DraftKings spokeswoman Sabrina Macias said the company takes a multilayered approach to check age and identity.
___
AP Sports Writer Tim Dahlberg contributed to this report.
We need to not let our addiction define us, but have our recovery define us.
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” ALL BETS ARE OFF”
Anybody who has watched a football game on television recently has seenads for fantasy sports websites that promise multimillion-dollar contests, cash prizes and testimonials from people who claim to have won tens of thousands of dollars. The companies behind these commercials say that their games are harmless and perfectly legal. But it is hard to believe that this is what Congress had in mind when it exempted fantasy sports from a law that effectively outlawed Internet gambling in 2006.
Fantasy sports have been around for years. For most of their existence, groups of friends played against each other over the course of several months. In fantasy sports, each player assembles a hypothetical team of athletes. Points are calculated based on how those athletes do in actual games. Now companies like FanDuel and DraftKings are encouraging people to play daily and weekly fantasy games in which they compete against dozens or hundreds of strangers on the Internet.
Players pay entry fees ranging from 25 cents to several thousand dollars to win awards that go from a few dollars to more than $1 million. The most a player can lose is the entry fee; the player whose athletes collect the most points, based on the athletes’ performance, wins the top prize. There are also lesser payoffs.
Photo
The Boston office of DraftKings, an online fantasy sports company. CreditStephan Savoia/Associated Press
These companies have grown rapidly with the help of aggressive advertising. Last year 41 million Americans and Canadians played fantasy sports, up from 27 million in 2009, according to the Fantasy Sports Trade Association. Professional leagues like the National Basketball Association andMajor League Baseball have invested in fantasy sports companies, as have businesses like Comcast, Fox and Google. Football teams like the New England Patriots and the Jacksonville Jaguars have set up cocktail lounges in their stadiums where fans can play fantasy sports.
This boom has grown because the Unlawful Internet Gambling Enforcement Act of 2006, which prevented payment processors from working with gambling websites, included an exemption for fantasy sports. At the time, however, most fantasy sports were the season-long, low-stakes games friends played with each other, not the daily and weekly games that companies are marketing now.
The companies argue that their games are legal under the laws of most states because they are games of skill, not chance, and they say they don’t allow people to play in the few states where the games are illegal.
Because daily and weekly fantasy games are so new, there are very few studies on whether they are addictive and result in the social problems typically associated with gambling. One study published last year in the journal Addictive Behaviors found that college students who played fantasy sports were more likely to have gambling-related problems than other students.
What is worrisome is that some lawmakers, like Representative Frank Pallone Jr., Democrat of New Jersey, are using the growth of fantasy sports to push Congress to let states legalize conventional gambling in sports. Late last year, the commissioner of the N.B.A., Adam Silver, called for legalizing sports betting.
The allure of profits from gambling clouds otherwise rational minds. Giving people more ways to bet on the outcomes of sports is sure to threaten the integrity of sports and create more gambling addicts, especially among young people who are already more likely to engage in risky behaviors.
Arnie and Sheila Wexler currently work with Sunspire Health www.sunspirehealth.com, a national network of addiction recovery providers. They work closely with facilities Sunspire Health Recovery Road in Palm Beach Gardens, FL and Sunspire Health Spring Hill in Ashby, MA where gambling disorder, substance abuse and co-occurring mental health recovery programs are offered.
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Fantasy Sports Employees Bet at Rival Sites Using Inside Information
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An employee in the DraftKings offices last month. DraftKings and FanDuel said “both companies have strong policies in place to ensure that employees do not misuse any information at their disposal.” CreditStephan Savoia/Associated Press
A major scandal is erupting in the multibillion dollar industry of fantasy sports, the online and unregulated business in which players assemble their fantasy teams with real athletes. On Monday, the two major fantasy companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading, that employees were placing bets on information not available to the public.
Last week, a DraftKings employee admitted to inadvertently releasing data before the start of the third week of N.F.L. games, a move akin to insider trading in the stock market. The employee – a midlevel content manager — won $350,000 at rival site FanDuel that same week.
The incident has raised questions about who at daily fantasy companies has access to valuable data, how it is protected and whether the industry can — or wants — to police itself.
The leagues have been swelling in popularity, their advertisements blanketing football game broadcasts.
The industry has its roots in informal fantasy games that began years ago with groups of fans playing against each other for fun over the course of a season. They assembled hypothetical teams and scored points based on how players did in actual games.
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But in recent years, companies, led by DraftKings and FanDuel, have set up online daily and weekly games in which fans pay an entry fee to a website — anywhere from 25 cents to $1,000 — to play dozens if not hundreds of opponents, with prize pools that can pay $2 million to the winner. Critics have complained that the setup is hardly different from Las Vegas-style gambling that is normally banned in the sports world.
On Monday,DraftKings and FanDuel, released a joint statement that said that “nothing is more important” than the “integrity of the games we offer,” but offered few specifics about how they keep their contests on the level.
A spokesman for DraftKings acknowledged that employees of both companies have won big jackpots playing at other daily fantasy sites. Late Monday, the two companies temporarily banned their employees from playing games or in tournaments at any other site.
“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,” the statement said. “Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”
Industry analysts said the episode could leave the leagues open to further criticism that they are too loosely regulated.
“The single greatest threat to the daily fantasy sports industry is the misuse of insider information,” said Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff in Fort Lauderdale, Fla. “It could imperil this nascent industry unless real, immediate and meaningful safeguards are put in place. If the industry is unwilling to undertake these reforms voluntarily, it will be imposed on them involuntarily as part of a regulatory framework.”
Already, there has been intensifying discussion on social media and among lawmakers over whether daily fantasy games are pushing the boundaries of an exemption in a 2006 federal law that has allowed them to operate. The law prohibited games like online poker but permitted fantasy play, deemed games of skill not chance, under lobbying from professional sports leagues. The games are legal in all but five states.
But because Congress did not foresee how fantasy sports would explode, one member, Representative Frank Pallone Jr., Democrat of New Jersey, recently requested a hearing to explore the relationship between fantasy sports and gambling. “I really think if they had to justify themselves at a hearing they wouldn’t be able to,” Mr. Pallone said in a recent interview.
In this case, the data that was leaked by the DraftKings employee, Ethan Haskell, showed what particular players were most used in all lineups submitted to the site’s Millionaire Maker contests. Usually, that data is not released until the lineups for all games are finalized. Getting it early, however, is of great advantage to make tactical decisions, especially when your opponents do not have the information at all.
A spokeswoman for DraftKings said Haskell simply made a mistake and that the company was certain that he did not use the information improperly. She declined to go into specifics about the safeguards or the company’s auditing policies.
Both DraftKings and FanDuel had prohibited their employees from playing on their own company sites, but they do not restrict them from playing elsewhere. In fact, representatives of both companies acknowledged that many employees of daily fantasy companies were players first and had continued to compete on other sites. Ben Brown, a co-founder of Daily Fantasy Sports Report, was first to disclose that Haskell had posted the information.
“There’s a significant amount of crossover,” said Chris Grove, an industry analyst and editor of legalsportsreport.com. “The nature of the industry is so specialized and so new that at the speed which they grew they relied heavily on the player population.”
Many of these employees set the prices of players and the algorithms for scoring. In short, they make the market.
As daily fantasy sports has blossomed into a multibillion dollar industry in the past year DraftKings and FanDuel have become a cherished sponsor of M.L.B. and N. F. L franchises.
Eilers Research, which studies the industry, estimates that daily games will generate around $2.6 billion in entry fees this year and grow 41 percent annually, reaching $14.4 billion in 2020. So high are the potential financial rewards that DraftKings and FanDuel have found eager partners in N.F.L. teams, even as the league remains a staunch opponent of sports betting.
Jerry Jones of the Cowboys and Robert K. Kraft of the New England Patriots have stakes in DraftKings and the company recently struck a three-year deal with the N.F.L. to become a partner of the American football league’s International Series in Great Britain, where sports betting is legal. In addition, DraftKings has tapped hundreds of millions from Fox Sports, and FanDuel has raised hundreds of millions of dollars from investors like Comcast, NBC and KKR.
Adam Krejcik, a managing director at Eilers Research, said early missteps are often part of booming growth in a new and often misunderstood sector like daily fantasy sports. He said whether Haskell, the DraftKings employee, made an innocent mistake or not the damage is done.
“Certainly does not look good from an optics standpoint and it strengthen the case for additional oversight and regulation,” he said.
Grove, of legalsportsreport.com, said this may be a watershed moment for a sector that has resisted regulation but now may need it to prove its legitimacy.
“You have information that is valuable and should be tightly restricted,” said Grove. “There are people outside of the company that place value on that information. Is there any internal controls? Any audit process? The inability of the industry to produce and clear and compelling answer to these questions to anyone’s satisfaction is why it needs to be regulated.”
Arnie and Sheila Wexler currently work with Sunspire Health www.sunspirehealth.com, a national network of addiction recovery providers. They work closely with facilities Sunspire Health Recovery Road in Palm Beach Gardens, FL and Sunspire Health Spring Hill in Ashby, MA where gambling disorder, substance abuse and co-occurring mental health recovery programs are offered.
We need to not let our addiction define us, but have our recovery define us.
GET OUR NEW BOOK GAMBLING ADDICTION AND HOW TO RECOVER FROM IT ” ALL BETS ARE OFF”
