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Scandal Erupts In Unregulated Online World of Fantasy Sports
HughPickens.com writes: Joe Drape and Jacqueline Williams report at the NYT that a major scandal is erupting in the multibillion-dollar industry of fantasy sports, the online and unregulated business in which an estimated 57 million people participate where players assemble their fantasy teams with real athletes. Two major fantasy sports companies were forced to release statements defending their businesses' integrity after what amounted to allegations of insider trading — that employees were placing bets using information not generally available to the public. "It is absolutely akin to insider trading. It gives that person a distinct edge in a contest," says Daniel Wallach. "It could imperil this nascent industry unless real, immediate and meaningful safeguards are put in place."
In FanDuel's $5 million "NFL Sunday Million" contest this week, DraftKings employee Ethan Haskell placed second and won $350,000 with his lineup that had a mix of big-name players owned by a high number of users. Haskell had access to DraftKings ownership data meaning that he may have seen which NFL players had been selected by DraftKings users, and by how many users. In light of this scandal, DraftKings and FanDuel have, for now, banned their employees from playing on each other's sites. Many in the highly regulated casino industry insist daily fantasy sports leagues are gambling sites and shouldn't be treated any differently than traditional sports betting. This would mean a high amount of regulation. Industry analyst Chris Grove says this may be a watershed moment for a sector that may need the legislation it has resisted in order to prove its legitimacy. "You have information that is valuable and should be tightly restricted," says 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 a clear and compelling answer to these questions to anyone's satisfaction is why it needs to be regulated."
In FanDuel's $5 million "NFL Sunday Million" contest this week, DraftKings employee Ethan Haskell placed second and won $350,000 with his lineup that had a mix of big-name players owned by a high number of users. Haskell had access to DraftKings ownership data meaning that he may have seen which NFL players had been selected by DraftKings users, and by how many users. In light of this scandal, DraftKings and FanDuel have, for now, banned their employees from playing on each other's sites. Many in the highly regulated casino industry insist daily fantasy sports leagues are gambling sites and shouldn't be treated any differently than traditional sports betting. This would mean a high amount of regulation. Industry analyst Chris Grove says this may be a watershed moment for a sector that may need the legislation it has resisted in order to prove its legitimacy. "You have information that is valuable and should be tightly restricted," says 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 a clear and compelling answer to these questions to anyone's satisfaction is why it needs to be regulated."
Sports go sports!
Athletics are number one!
Participants are heroes!
Go team, yeah!
njnna is right - the bookie doesn't lose his shirt under any circumstances. When you bet on sports you're not really betting against the bookie; you're betting against the other bettors. The bookie is making money because the winners are getting paid less than they would if the bets were mathematically fair. Let's say you had a friendly bet with a buddy over a game. Between you you've decided one team is twice as likely to win. So you bet two dollars, your buddy bets one dollar, and the winner takes all three dollars. Assuming you've judged the odds of the sports outcome properly, this is a mathematically fair bet - if you made it a million times you wouldn't win or lose money (compared to the amount you've bet, anyway).
Now change the scenario and say a third party is acting as a bookie. The bookie offers you 3:8 odds (instead of 1:2) and he offers your buddy 7:4 odds (instead of 2:1). You still bet two dollars, and your buddy still bets one dollar. This time, though, the winner gets $2.75, and the bookie pockets a quarter. Notice he pockets the quarter no matter which team wins. This bet isn't fair, mathematically speaking. If you and your buddy make it a million times you'll both be broke and the bookie will have all your money. This is why you can find bookies everywhere you go, regardless of legality :)