Fantasy Sports Employees Bet at Rival Sites Using Inside Information
nytimes.com
nytimes.com
And regarding how relatively chummy the NFL is with elected officials, don't forget that commissioner Roger Goddell's father was both a senator and representative from NY state. That's just one data point, but there are probably a lot of backroom conversations that we don't know about. I think there's too much legitimate money at stake for there to be a online poker-like, "Black Friday" type event for the daily fantasy scam.
It appears the DFS executives are paying the right people, whether in broadcasting, sports leagues and/or lawmakers.
1. DraftKings and FanDual are US based companies, most of the big poker sites were not.
2. There is an exception for fantasy sports in the Unlawful Internet Gambling Enforcement Act. You can debate whether Daily Fantasy Sports should qualify, but unlike poker it is at least starting on legal ground.
3. Daily Fantasy Sports has buyins from the NFL, NFLPA, individual teams, ESPN, the major broadcast networks, etc. Lots of peoples' hands have been greased from all of the money DraftKings and FanDual have been spending on promotion.
It's pretty obvious this was a planned process.
(disclaimer: I love MLB, but c'mon).
The only reason why we banned online gambling was banned was because of Sheldon Adelson's lobbying, not because of some inherent moral corruption.
So you can't host shit in U.S.-east or us-west and serve online gambling stuff from there.
However if all your betting business is international, you can host in any aws region...
Basically all online gambling regulations are just as lame and corrupt as they've always been.
Online poker isn't as fun when you're consistently losing money- there's no "outside" benefit.
Exploit loopholes and break rules until you're big enough to block others from following in your footsteps. That seems to be how true Internet empires are built. It worked for Facebook, whose massive growth was fueled by deals with large email providers that gave their spammy friend invites a 100% inbox rate. It's not hard to get a billion users when the average new user is (in many cases unknowingly) spamming 500 or more people with an email invite to the site.
It worked for Facebook, whose massive growth was fueled
by deals with large email providers that gave their
spammy friend invites a 100% inbox rate.
Genuinely curious.
[1] https://books.google.com/books?id=RRUkLhyGZVgC&pg=PA241&lpg=...
My guess is if he did use tournament data from DK to populate a team on FD, he did it for himself alone. But he absolutely has access to all of the data they say he did. This is definitely a huge advantage for the big tournaments, because you need low-percentage ownership players in order to stand a chance at having a top lineup. It would help to see how the top players picked their tournament lineups on DK so you could extrapolate that into a team on FD.
The data that DraftKings acknowledged was released by its 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.
That info gets published once the contest starts (it's very compelling data), but having access to that ahead of time is the equivalent of insider trading - because you have knowledge other people don't have when they make their picks, which provides you a completely unfair advantage.
You find outliers and apply a pricing model that finds the best gaps. The information is incredibly valuable. Take it from someone who did this for a living at one point.
I'm guessing that Haskell assumed that if 60% of people on DraftKings were going to pick [Fantasy Player X], then about 60% of people on FanDuel would pick [Fantasy Player X], and knowing so ahead of time informs the odds on each bet?
This reminds me of the Capital One/Chipotle incident (http://www.bloombergview.com/articles/2015-01-23/capital-one...).
I think in general, one would benefit from accurately picking players with great expected values who are also generally under-picked.
This may be a bit of a simplification of what he actually did, but it was my understanding that he would see the trends in how his users were betting for the week, then looked at at past performance and used that info to make bets himself. He started making quite a bit of money doing just that.
So generally, if you have data on how people are expecting games to go and have knowledge about the different betting and/or gaming sites, you have an advantage over the other players.
Efficiency in Exchange Betting Markets
http://faculty.london.edu/mottaviani/exchange-betting.pdf
"In terms of the Sobel and Raines model, a lower conventional bias in the exchanges relative to traditional betting markets is consistent with a higher proportion of ‘serious’ bettors on the exchanges than with bookmakers"
Efficient Market Hypothesis
http://www.betfairprotrader.co.uk/2010/12/efficient-market-h...
"If you were to take all horses starting a race at 2.76 then you would find their win rate was pretty close to 36%"
Market Efficiency: An Analysis of the Internet Betting Exchange Market
http://studenttheses.cbs.dk/bitstream/handle/10417/2888/fred...
I, swanson, am an employee of DraftKings and have access to your lineup and/or data about all the other lineups entered. (* This is speculation)
I, swanson, then use this inside knowledge to make my own lineup on FanDuel (I am not allowed to play on DraftKings because I work there). I win big money on FanDuel.
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The results of the NFL games are not the inside information, but rather the game theory-esque information about the decisions made by other parties in a zero-sum game. Knowing which players the elite top 1% players are playing is an advantage. Knowing which players appear in the most (or least) lineups is an advantage. This data is only available to insiders (employees of the companies), so that is where the "insider information" analogy is coming from.
How does this all help you win? You can get an average return in a tournament (e.g. buy in for $10 and win $15 or $20) by playing high point, low variance players (safe bets), but to win big, you need to play high variance players (e.g. the wide receiver who will probably score 4 points, but might score 20-30 pts if they have their best week of the year). That said, if everyone plays the same high variance player, you will be beat by or end up tying with many other players. So, if I have two high variance players that I think may have a good week, one who is owned by 8% of teams and one who is owned by 1%, I am better off playing the 1% player who will put me ahead of the field if he scores big.
Edit to add information for those that aren't familiar with daily fantasy:
Each player gets a salary and you are working under a salary cap that prevents you from making a team consisting entirely of "studs" (the top players at each position). If salary cap is 10X, then the average salary on your team needs to be X. A "safe bet" like Tom Brady or Aaron Rodgers will cost you close to 2X. So for every safe bet you need to pick a long shot like Tavon Austin (who Yahoo tells me was owned by 1.4% of daily fantasy players) with a salary just over X/2.
So this guy won big the first time he tried this? Or maybe he's tried 4 weeks now and has already won big?
This still doesn't add up.
You _must_ pick some people that are high-cost high-reward types. The superstars that will almost always get their lion's share of points. You cannot win a tournament just by picking high variance players, or it would be extremely hard to do so. You also have a salary cap so you can't just pick 5 superstar players. The higher their perceived worth, the higher they cost to "buy" them.
So the main point you can differentiate yourself from other players is to find "sleeper" picks. These are players that are OK but not GREAT but if given a proper matchup, could do very well.
For example, you may pick the 2nd best receiver on a team hoping he has a great day because the opposing defense is known to double team the offense's best receiver. This may give the 2nd best receiver more opportunities for catching the ball for yardage/touchdowns.
BUT the thing is, this happens a lot. So you know maybe 4 games where this will happen. But you don't know the percentage picked of each player. Just like in March Madness brackets where picking all chalk (the favorites) to win is a bad strategy because almost everyone else is doing it and at best/worst you will tie, it is to your advantage to bet on players that you think _may_ have a chance, but are picked the least from the pool.
So the advantage this employee got, was he knew how often each player was picked on DraftKings, so given his basic assumptions he just applied those percentages to FanDuel. He knew player X had a good matchup, but _no_ one was picking him. So he plays multiple lineups with player X, buying him up so if he has a good day the employee will win big.
But he also places wagers on player Y, player Y has been picked more than player X, but still enough where the employee can get a good return, so he places a couple of lineups with player Y in it (even combining with player X hoping they both have big games). Buying some lineups with player Y also hedges your bet in case player X doesn't do well. This is probably what you are curious about. You don't pick only player X hoping he does have a great game. You hedge by buying more lineups with him in it, but supplement that with other lineups and picks that you think are +EV.
So the advantage is you know who hasn't been picked a lot. And as you start buying players you have to start spending more "efficiently." If you know player Z has only been bought 10% of the time but you know he has a high likelihood of a big game, you will pick player Z more in your lineups than other lower priced players because his returns will be good.
1)players construct their line-ups and have a local program compute a secure hash of it (with some player specific data in it like arbitrary 10 digit number at the start)
2)only hashes are posted before the game starts (or once a deadline for submissions is reached or w/e)
3)then a player is allowed to post a matching (to the hash) line-up
Failing to do 3) results in a loss.
Are there any problems with that solution?
It is a good idea though and would certainly curb this kind of thing happening.
Editing the functionality is easy as well, you just replace the hash again. It just requires a local client to do so instead of doing it on the server directly.
It doesn't sound like the companies themselves are intent on profiting from insider information, just a couple of opportunistic employees with privileged access.
That said they acted on knowledge not everyone would have. Similar to inside trading, but not the same due the unregulated nature of these sites. I'm not exactly sure what laws that would bump up against, but definitely most important to these sites who are trying to build consumer trust.
If I was employed by a horse racing trainer, and I happened to know certain information about the preparation of a particular horse, which the public hadn't factored into the available odds, and I placed a bet on that horse to win, there's nothing illegal in that (not in the UK at least). I'm in a position to act on uncommon knowledge, but I've still placed a bet and there's no guarantee the horse will win. It happens all the time.
so it would seem the certainty of return is irrelevant.
I don't see how you can know that a player will hit a home run, before everybody else.
Otherwise the general public might be less likely to want to bet because they know that the insiders will get a disproportionate amount of the winnings, effectively lessening their odds.
The fact that it is a bet, and might not always pay out, is irrelevant. If you keep using insider information, on average you will profit from it.
From there, I think the debate will turn into whether employees at one DFS site should be allowed to play on other sites (actually, that debates already on).
I, for one, think they should be able to. It gives employees the opportunity to experience what it's like to be a user of a similar product. It lets them stay up to date on their competition. And I just think it keeps people inspired. If you really like this stuff - enough that you want to work at a company that makes it - I think it's motivating to experience that when you can't use your own product due to its nature.
However, I'm pretty sure I'm in the minority. I think I actually saw that FD and DK have already banned their employees (in the wake of this) from playing on each others sites.
But to me.. that's silly. If you make it impossible for employees at DK to have access to the data ahead of time and vice versa, then there's really no unfair advantage. Plus, if their products weren't the exact same (and products in this industry WILL diverge), then it also wouldn't matter.
Also, I don't think it's too surprising that FD or DK don't enforce their rules too harshly. As long as they are making a lot of money, why do they care?
They'll care about it becomes an impediment to them making lots of money, which seems like right now.
This is why you see fantasy sports succeeding where previous "games of skill" wagering failed. Fantasy sports draws on the real event for some of the value to the player, and players will put up with a high rake. Not so much for a poker room.
Not necessarily disagreeing or agreeing with you about 10% of rake being a scam.
[1]: https://medium.com/@dhh/making-money-along-the-way-did-dropb...
Even if it were hidden from the public, it's fairly straightforward to reason that it is stored in a database and that at least one employee has read-access to that database. I would be more fascinated to learn that no DraftKings or FanDuel employee ever played DFS without at least looking at their own ownership data.
Except it's useless at that point because you can't change your lineup. The employee has the ownership percentage stats before anyone else and before the first game begins and can use it to craft his lineup.