Payment Processor to Stop Working with Daily Fantasy Sports Clients | Hacker News Reader

Payment Processor to Stop Working with Daily Fantasy Sports Clients

nytimes.com

69 pointsJudson68 comments

Finally the government is taking action against these companies. Think about it, these guys provide the ability to wager on the outcome of a basket of performance statistics. The government is totally right to classify this as gambling and not skill based wagering. Plus, these things have no underlying value at all, just structured binary outcomes based totally on short term results.

What other institution in America is allowed to create non-collateralized chance options markets out of thin air and float them to the public? This is unprecedented. These guys are clearing millions. Could you imagine what woild happen ifit was billions or trillions? I bet that would make for a pretty volatile environment.

I didn't realize the sarcasm until near the end. Well done.

While humorous, this is nonsense, and a complete mischaracterization of what a stock market actually is.

A stock market is a place where a group of businesses are able to offer ownership stakes in their company in exchange for cash.

The fact that people have built a speculation market around it is very different than a gambling wager. If you buy stock and it decreases in value, you still own the stock.

Edit: As CPLX points out below, in reference to a derivative market, the point is much more valid.

My assumption was that he was talking about derivatives and synthetic securities (i.e. "non-collateralized" as he said). If that's the case his analogy is actually quite reasonable.

I am talking up structured financial instruments like that. Obviously, DraftKings doesn't map perfectly to etfs and options, but i think the analogy stands.

To be clear, I think that skill based wagers should be allowed. I was begging the question, is there a difference here, and it is:

It is a lot better known how the outcome of a football match will be determined than other fin. products.

Football is pretty discrete and doesn't have a broad impact on soccer outcomes (unless you are not American the soccer === football)

This is discretionary capital and not investment money.

So, my sarcastic point was: thanks for protecting me from having fun with $20 i earned weekly, don't you have anything else you might want to look into?

A stock market is a place where a group of businesses are able to offer ownership stakes in their company in exchange for cash...

..10 microseconds at a time.

You don't think the stock market maps perfectly to real world markets? Average investors need nano-second liquidity. Hedgefunds help the price stay consisten so that when a massive order comes in it goes into a blackpool and is split up, that way the price isn't off by 0.001% which in my opinion, is well worth destabalizing tge global economy.

I mean, prices are just information, don't we want that information to be a meaningless and irrelevent measure? Luckily, equities prices are well known to be irrelevent to investors.

a well known fact that price was dropped from standard metrics several years ago in favour of popularity.

Popularity / earnings

The sports analogy for buying a huge public company's common stock is buying a season ticket. The season tickets are relatively liquid compared with actual team ownership and the value rises and falls with how well managed the team is and how popular the league is overall.

If you bought a NE Patriots season ticket in 2000 and sold it in 2010, you made a pretty penny and you hopefully enjoyed 8*10 NFL games with your friends/family. If you bought a Tennessee Titans season ticket 10 years ago, you can't name your selling price today, but it is still worth hundreds of dollars.

do season tickets never expire? that's pretty neat.

I've never thought to look in to how a season ticket actually works, the stock comparison is an interesting one and puts them in a different perspective for me.

Oh no, they expire.

Basically, season tickets tend to come in two flavors...

For teams with rather low demand (Like, say, southern NHL teams, and most (all?) baseball teams), the season ticket represents a significant discount over single game tickets, and generally are relatively easy to acquire - I had Carolina Hurricanes tickets for a few years, and by the time you add up the steep discount on the tickets themselves, flat rate parking pass (Not included, but again, a steep discount), and not paying any Ticketmaster/"Convienence" fees, it cost me less than half (on a per game basis) what buying single game tickets would cost.

At the other end of the spectrum, you have high-demand teams that sell out 99.9% of games, like most Canadian NHL teams, and many NFL teams. There, practically all seats are held by season ticket holders (whose annual season ticket price is usually the same as, or sometimes even HIGHER than (hypothetical, generally not available) single game ticket pricing), and where the "rights" to a season ticket can trade for lots of $$$ (thousands) on the secondary market.... you can't just buy tickets, you have to buy an existing ticket holder's account, essentially. A bit like taxi medallions in NYC.

Additionally, season ticket holders usually have preference to purchase season tickets for the next year, and the next. Then along come the secondary markets and what seems like easy profit if your team improves.

The difference is gambling is zero sum. For everyone that gains, someone else loses. In fact these games are negative sum, since the middleman takes a hefty profit for himself. These games have negative expected value, but use tons of clever psychological tricks to make people think they don't. Humans aren't perfectly rational after all. We evolved on the savannahs of Africa, not in a Casino.

> For everyone that gains, someone else loses.

How is this untrue in the market? Especially options. Someone is on the other side of this as they aren't based on created value. If someone lays out a huge short, it is priced by the likelihood that company goes down, in the event it does in fact go down, either the underwriter or whoever bought calls pays, either directly or indirectly.

Also, in the broader market. I don't think it still resembles the, "company with solid fundamentals needs cash for expansion" model, where investors participate in the companies growth because they believe in the product.

If there were no markets, then trade would be really inefficient. Prices would be higher, they would fluctuate more. If there was no fantasy football, the world would be a better place.

Betting on sports teams takes some statistical knowledge and modeling -- there's some skill involved.

Betting on random numbers takes no knowledge -- there's no skill involved.

If the former is illegal and the latter is not just legal, but a business actually run by the state -- isn't this hypocritical?

> If the former is illegal and the latter is not just legal, but a business actually run by the state -- isn't this hypocritical?

Both are generally illegal in most states in the US. That some states operate one while generally prohibiting it is not particularly odd; states often reserve the right to do things themselves that are generally prohibited.

Gambling is usually a business run by states as it is like an extra voluntary tax. Usually the returns are lower than in private run lotteries to make it less appealing, so the final result is that it is heavily taxed. Also there are laws that limit how much advertisements you can do. Banning gambling doesn't looks like it works, people continues gambling in worst conditions. Letting the state control it allows for more control and it is less profit oriented as social issues are taken into account. I find it a really good solution to the problems that gambling has. And it allows people that does responsible gambling for fun to do it.

Letting the state control it allows for more control and it is less profit oriented as social issues are taken into account.

In which ways do State-run lotteries take social issues differently than privately run ones? I'm not talking about the application of the lottery tax, as private lotteries could be taxes as well.

I see more advertisements for state-run scratch tickets, Meggabucks, and Powerball than I do for any other single organization's products. Worst, this crap caters and appeals exactly to the clientele that can least afford to light $10-$20 on fire as a habit.

With state lotteries not just a matter of making available safe-ish gambling that's not controlled by organized crime and the like.

It's also a matter of having the State spending millions of dollars advertising gambling at its citizens, reaching out to recruit new potential-gamblers from among the poorest citizens (+), promising them money beyond their wildest dreams, instead delivering them variable-reward reinforcement schedules (well known as the hardest addictions to quit) and a small extra dose of Poverty every time they're exercised.

There is a massive conflict of interest if lotteries are to be evaluated as a solution for social ills.

(+) Have you seen how many lottery advertisements there are in Whole Foods? Have you seen how many there are at a convenience store in a poor neighborhood, or on public transit, or the like?

Lotteries were often created based on popular vote, not by lawmakers. The argument was that the profit would go to education (it didn't.)

Some questionable processors will step in. Stuff will get shut down, money will be frozen in accounts. This is online poker all over again.

I think DFS has better chances of survival because they have some strong deals with people that know how to move and shake in Washington (NFL says hi). And of course this link (John Oliver) needs to be posted eventually when discussing anything DFS related:

https://www.youtube.com/watch?v=Mq785nJ0FXQ

Great piece by John Oliver. I wonder what it feels like to work for those companies..

Lives were surely ruined by this.. how do you sleep with that.

Can we just legalize gambling and be done with all this nonsense. Though it clearly has some downsides it has to be like the 144,566,786,335th worst thing that's legal and permitted.

You are possibly under the misapprehension that adults should generally be allowed to decide things for themselves. This point of view is old fashioned.

Society is nothing more than a collection of people who agree/desire to abide by a common set of rules. Typically enumerated and enforced by some type of governing body.

If the American people in general want to live in society with only a subset of gambling is allowed (which it appears they do), that's exactly the point of the government.

It would be desirable if the government followed the agreed upon rules, I'll agree with you there.

Abraham Lincoln had an impossible choice to make, and withoutthe benefit of hindsite I dont know anyone could have made a better one.

Unfortunately, Allowing states to decide for themselves whether they could literally own humans or not, lead to a civil war that strategically undermibed states rights.

So no, it is a lot harder to just 'have a subset' of something. Plus, obviously the internet is national + global, so while I agree with you I would argue the governments only role in the matter is arbitration in the event of a lawsuit as these are simply contracts.

You probably got downvoted because:

> if the American people want...

Is rarely considered.

Perhaps if they sign away their claims to the social safety net.

Sure, as long as we prohibit advertising in media, tax it up the ass, and force warning labels covering at least 25% of any logo.

This is the way to go. This is a tragedy of the commons situation. Gambling creates a lot of problems that are not paid by the companies or individuals participating, but by the society at large. The heavy taxing and limited advertising makes a lot of sense so the industry is accounted for all that hidden costs. Gambling addiction is a real issue that harms families and communities. If the gambling industry doesn't takes care of that paying higher taxes, that same communities are the ones dealing with that extra cost. A social lose-lose situation. For me an ever better solution is state owned gambling. It is much more controlled and it is harder to open loopholes for abusing it using bribes, historically a common thing with this kind of industry.

> Can we just legalize gambling and be done with all this nonsense. Though it clearly has some downsides it has to be like the 144,566,786,335th worst thing that's legal and permitted.

The problem is that the big Vegas money doesn't want it legal. They want it monopolized with them in charge of the monopoly.

Once the government choked out online poker's resources for paying people it was all but the end for them.

I imagine it will be similar for DFS. Assuming they cannot find another processor to take the risk (probably also means high withdraw fees).

As for them replacing $ with bitcoin. You think 95% of the people who play DFS even know what bitcoin is or will go through with the trouble? People tried that with online poker, and while I can't tell you how many of those sites are left, they weren't a good alternative..

A bit surprising after this OTL report came out this week about pro sports league getting more involved with sports betting: http://espn.go.com/espn/otl/story/_/id/14660326/nba-nfl-mlb-... as well as positive results on New York injunctions.

It's interesting to note that Amaya (aka PokerStars) entered the market as the #3 player last year (via acquisition of Victiv) -- but basically withdraw pre-emptively during the recent legal dustups, banning players from all states where DFS is not explicitly legal/regulated. Wonder if their longer-term, slow rollout might end up playing out in their favor? (personally, I think it won't; either FD/DK will outlast the legal threats or the whole thing will explode)

The fall of DFS (if it occurs) will have serious ripple effects. I know DraftKings alone was spending at least $3 million/day (maybe more) on advertising at their peak last summer, which would make them one of the largest digital advertisers in the world. Presumably FanDuel was similar.

The biggest ripple for me will be avoiding their brand all over MLB games come Spring. The product placement was annoying last year.

Annoying and hypocritical. This is the same league that's barred Pete Rose from the Hall of Fame, and all their scoreboards last year were sponsored by Draft Kings.

Perhaps they were operating under the mainstream radar for a while and all the advertising was their downfall. According to Wikipedia, Draftkings has been around since 2012.

I'd never heard of them until they started plastering every sporting event I watched with annoying, loud commercial after commercial.

Might be a nice opportunity for Bitcoin here. Let's see if they take that step or prefer to go out of business

Ssshhhhhh. One mustn't speaketh of bitcoin 'round these parts, less you get hanged. Nevermind the fact that this is the exact reason something like bitcoin exists.

"Regulatory avoidance isn't a good business model."

- Ron Bernstein, CEO of Intrade

Regulation isn't always a good social model. Rulebreakers get things changed. Sometimes that coincides with a great business opportunity, and sometimes it doesn't.

"lol"

-Uber, Amazon, Airbnb, every bank, &c.

what did amazon do that was skirting the rules?

Paying sales taxes in CA?

Collecting sales taxes in most states.

Can't they just get another payment processor? Aren't there dozens, if not hundreds, of payment processing companies out there? Surely someone will pick up these gigantic clients.

Visa, MC, et el will simply cut them off. That's how Congress killed online gambling previously.

It looks like there's enough evidence to do so:

“As you are aware, an increasing number of state attorneys general have determined that daily fantasy sports (‘D.F.S.’) constitute illegal gambling,” Jonathan Ellman of Vantiv.com wrote in a letter obtained by The New York Times. “Although in recent weeks D.F.S. operators have raised numerous arguments to the contrary, to date those arguments have been unsuccessful and/or rejected.”

That's how they tried to kill online gambling and failed. They had to literally seize physical servers and put "Confiscated by the DoJ" on their websites to shut them down.

So it's been done before? I guess it can be done again.

There are very few processors in the US that will process this type of risk. I'm the founder of a lottery app company called Jackpocket and the compliance / due diligence is ridiculous. Now that DFS is seen as illegal and toxic its going to be near impossible to get someone to underwrite this risk. Time for Bitcoin to shine!

Yes. Because a currency almost completely controlled by Chinese miners who are strangling the network at 1MB blocks, causing transaction times in excess of three hours at peak and just introduced the ability to arbitrarily reverse those transactions during the lag is totally going to handle DraftKings and FanDuel.

Yep, they should just stick with the current system of 3-5 day transfers, giving over all of your personal information, and being subject to freezing/closure at the whim of authorities with no due process.

Bitcoin transactions rarely take more than 30 minutes, including peak times, if you apply a sufficient network transaction fee (right now equiv. to $0.05). It cannot be "arbitrarily" reversed. RBF is not even in production, and if/when it is, it's is a separate type of transaction that is optional and marked as such. China does not control bitcoin, yes they perform most of the mining but it's because China is huge, has cheap electricity, and produces mining hardware. There are a lot of independent actors involved and if there was foul play (which there has not been any evidence of) the network could route around China without too much disruption.

Bitcoin is not perfect and it's still in its infancy, but it is improving and it is still more censorship resistant and decentralized than any other form of money.

Ummm...all of the "conventions" about increasing block size had 5 people from China representing more than 90% of all successfully mined blocks. They won't let the block size increase because then it'd be too hard to get them across the Great Firewall.

China is currently an issue and the network won't route around them.

So what? If China stops mining efficiently, then mining will move to the next country with the cheapest power.

But they won't stop, because they currently control the only process that could make them stop.

That's not really accurate. There are many stakeholders in bitcoin that are part of the ecosystem and all can determine its future. Mining is one part of the equation, there are nodes that validate transactions, there are exchanges that give bitcoins value by providing on-ramps to other currencies, there are merchants who accept bitcoin for goods/services, there are core developers, and finally the end users, investors and hodlers. If miners decide to damage the network through collusion, then it's unlikely the other actors will allow this for long without altering the code to mitigate the threat. What good are these ill-gotten coins if exchanges will not give them dollars for it, or users have no demand for them? Contingency plans have already been developed for this scenario and, so far, they've not been needed because the miners are as invested in the long term success in bitcoin as anyone else.

What are Daily Fantasy Sports Clients?

In this case, they are referring to DraftKings and FanDuel.

I couldn't figure out exactly what do those do.

Anyone wonder if this may be the final straw that breaks the camel's back?

Which camel?

Fantasy Sports

Correction, Daily Fantasy Sports. Regular ol' fantasy sports, where you manage a team over the course of the season is specifically legal. The argument around DFS is that it's not the same as fantasy sports.

No, pretty sure fantasy sports is legal because people do it for fun / a bet amongst themselves. Maybe I'm wrong but I haven't seen any season-long fantasy sports sites (like Yahoo) offering millions of dollars in prizes in exchange for your wager.

There was a specific exemption in the Unlawful Internet Gambling Enforcement Act that allowed for "skill-based" fantasy sports.

See 1,e,ix (or ctrl+f "fantasy"):

https://www.law.cornell.edu/uscode/text/31/5362

Fantasy betting is explicitly legal as long as it's skill-based, not dependent on a spread, and not dependent on a single game.

And this isn't the same law the 1 days are using? Are you suggesting that DK and FD will end up doing season long paid sports and everyone will be OK with it?

If they did season-long paid sports, everyone would have to be okay with it since they'd be explicitly legal.. ESPN / Yahoo / CBS all have leagues without issue. I don't think DK/FD can afford to do the season-long versions without significant layoffs and restructuring, they're set up like European gambling houses in terms of staffing and advertising, neither of which are as useful for season-long versions.

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