FanDuel Raises $275M
recode.net
recode.net
...and a rare success story for public funding from Scottish Enterprise. I worked at a spectacularly bad startup funded to the tune of $1m by Scottish Enterprise.
If you're a moderate or greater sports enthusiast, with ~20 bucks to spare, you can make turn it into a few hundred pretty quickly, like within a week or two.
I legitimately use it to supplement my income, started with 20 bucks.
Danger ahead. If payouts are even a little subsidized by investment/marketing dollars, into slightly-positive-expectation territory, this sort of business can achieve almost arbitrary revenue growth. (Plenty of smart money, or even just intuitive-do-whatever-works-until-it-stops-working money, will be happy to buy $10 bills for $9.50, over-and-over. Lazy susan revenues.)
But when the promo subsidies end, or the happy-to-lose-for-a-while fish who are attracted by mass advertising reach 'extinction', the bulk revenue can disappear just as quickly.
Will this remain a favored form of negative-expectation gambling afterwards? Maybe, but probably at a size way below its novelty/subsidy-goosed peak.... which might already be behind us.
UIGEA, [1] the legislation that was used to take down the online poker sites, contained an exemption for fantasy sports. However, that exemption is only valid if the business is operating in compliance with individual state laws. There is an increasing sentiment that DFS is sports gambling under a number of state laws, and many people are just waiting to find out which state will prosecute first. At the time the UIGEA exemption was created, legislators hadn't even contemplated the concept of DFS, and the very legislators that wrote the exemption have expressed concern over it.
Since investors with this kind of money have done their due diligence, my guess is that they just want to ride the revenue train until the inevitable state-by-state crackdown occurs. It's no coincidence that this investment is occurring just before football season, which is their biggest revenue driver by orders of magnitude.
[1] https://en.m.wikipedia.org/wiki/Unlawful_Internet_Gambling_E...
I don't know details, but I think Fan Duels model has had some court tests and it was ruled a game of skill (in a way that poker was not somehow) somehow because you a) picked your lineup and b) there were no random number generators.
Here's a few articles: http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-s...
http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-leg...
That second one seems to specifically mention this clause of UIGEA: "1. In many cases, playing fantasy football for money is entirely legal under federal law. The Unlawful Internet Gambling Enforcement Act of 2006 includes an explicit carve-out for fantasy sports games that meet three criteria: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid; (2) all winning outcomes reflect the relative knowledge and skill of the participants; and (3) the fantasy game’s result is not based on the final scores of any real-world games."
So it seems as long as the individual tournaments run have fixed prize pools they satisfy (1), (2) seems to be met because there's still sports knowledge of the sport that can improve performance, and (3) is met simply by their scoring system not having to do with final scores (and includes lots of other stats to help) although this one would probably need a text check to say what "based on the real-world scores" means exactly.
DFS sites already exclude states where the games are not clearly legal (e.g. Arizona, Iowa, Louisiana, Montana or Washington, also Quebec) and have additional restrictions placed on some states (19+ in AL or NE). If a state were to pass a law or make a court judgement against it, we would simply cease operating there.
It's possible that some states will do this, although it seems that the sentiment is actually going the opposite direction, but there will be no prosecution. The industry is very proactive about monitoring legal issues.
My personal definition of the term is that a player must perform better than random chance (i.e. you cannot do better at roulette than a randomizer can), and also be able to win consistently, long term (i.e. you cannot beat multi-deck blackjack). We have players that have impressive winning records over thousands of contests.
It's possible poker fits this definition and there are people trying to demonstrate it. I certainly know that I am not very good at it!
These are a form of real-money-payout online gambling. They're legal. How quickly they evolve into pure casinos, as opposed to just 95% casinos, I don't know. They can't do something as clinically addictive as virtual slot machines and give payouts, but I bet they can come pretty close.
It's not that hard to be break-even given you know the players across the league well and have a real understanding of the underlying mechanics of the sport.
As far as the business goes... At some point they'll run out of new players, and the sharks will have a big enough bankroll to basically suck all the dead money out of the game leaving almost nothing for good, but not fantastic players.
When that happens, either people will keep playing because it's fun and Fanduel has a great business on their hands (precedent: sports betting) or people who are not making money will get out, and new players will be discouraged from joining an established scene (precedent: online poker). I'm leaning more towards it going to the fate of online poker eventually, but it might not happen until sports betting is legalized in the US.
I've previously played NBA fantasy, NBL (Australian league) fantasy and also bet small-stakes on basketball (mostly NBL). I no longer have time for fantasy but still bet.
When playing fantasy NBA against friends, I used various methods of calculating average output and forecasting it against a schedule and then made decisions on when to trade players. That was in a league where player values rose and fell based on their popularity in the system. It can get very time consuming if you want to maximise your chances. The NBL was simpler but someone using a spreadsheet to time trades through the season would always beat those who weren't.
I bet on the NBL because it's not a strong and well-researched market by bookmakers in Australia and I have very good domain knowledge short of advanced statistics (hear a lot of rumours, know players, tendencies, injuries). I have been approached in the past by a bookmaker about trading my info with them for a weekly tab.
I imagine these daily fantasy comps remove the schedule from the equation (besides fatigue, etc), but you'll generally be up against other committed players. Never played one personally. I imagine you'd have to rely on fleecing fresh/occasional players rather than the established pros.
While our app did also allow real-money wagering with payouts, the focus of play was to be social and game with your friends rather than to make money or gamble with strangers. It is totally normal for people to play and nkt wager any money - maybe for you and your friends bragging rights are enough, or maybe you assign your own real-world prize to the winner if you want. but if you wanted to 'sweeten the pot' with dollars, we also made that possible through the website.
It was definitely 95%-100% game, and optionally 5% real money wagering if you even did that. For example, I have 'won' $25 I probably can't legally withdraw from the company by playing, but Ive never wagered a penny and dont even have a card hooked up! So it is possible to play with real money without paying if you win enough too!
Though you could hook up a card and wager tons of money, theres no additional reward to that, and it wont give you any advantage in how you perform in the game. Its not designed to entice people into gambling.
If fantasy or daily fantasy is sports betting, then this underclass of fantasy sports would be something akin to a lottery ticket or "scratchie" rather then these head-to-head games. If you ask me to play daily fantasy, I'll say "No time, sorry" and ignore it. But if you give me an app/page with a pre-picked team and moderate financial interest in it doing well, I may watch the game and track stats.
You could send out random teams ("Your team for tonight is x, y and z!") with an adjusted under/over (for stats, totals, etc) and then give people the option to double-or-nothing with a bet, or whatever. "Win a $5 Amazon voucher, or bet 10 tokens now to have a chance at a $50 voucher!"
The sports leagues are actively interested in gambling as something that gives people another incentive to watch games. If you have no-name in your fantasy team, you suddenly care about every time they touch the ball.
I can imagine they might set it so that you have to be viewing the stats/screen within x minutes of a result, to prevent people from just checking in the next day.