In the tremendous 1982 film Diner, the character Boogie (played by Mickey Rourke) is talking to a bookie, Bagel, about a $2,000 bet he put down on a basketball game. Bagel questioned Boogie about the bet, knowing Boogie didn’t have $2,000 to wager.
“The game’s a lock,’’ Boogie said.
“Nothing’s a lock, Boogie. Nothing’s a lock,’’ Bagel said with a tired wisdom.
That moment (about a wager Boogie lost, by the way) comes to mind when considering the ongoing controversy involving the nation’s two most popular daily fantasy sports sites, DraftKings and FanDuel. This week, it became known that a DraftKings employee “accidentally’’ released information that could be beneficial to anyone playing fantasy football two week ago prior to the games being played.
That information was followed by the news that the employee in question won $350,000 playing on FanDuel for that same day. The fact employees from one site are able to compete on the other site boggles the mind a bit.
ESPN this week reported that DraftKings employees won approximately $6 million on FanDuel this year.
The amount of money being “won’’ on these sites is remarkable. According to some ads, the big winner each week can win $1 million, for one day’s picks. Their commercials (more on those later) suggest that millions and millions of dollars will be doled out by these sites over the entirety of the NFL season (they also do drafts for NBA, NHL, MLB, soccer and other sports as well).
Here are the details on how much money is being wagered by how many players:
Daily fantasy play requires the contestant to select players from all of the 32 NFL teams, using a salary cap used by all other contestants. The NFL players are given a salary based on their pre-determined value (as determined by the web site). Players score points for rushing and passing and catching yards and touchdowns. Contestants get points for picking one team’s defense. Kickers provide points for field goals and extra points.
Once the games begin and the selection process is over, both companies issue information on how many contestants selected individual players. If you have the same players as everyone else, you don’t have much of a chance of winning. Your selections have to be different from the norm without being outside the realm of point scoring. That’s why, when a contestant playing on one site actually works for the other site, the possibility exists that he has some inside info retrieved from the records of his own company.
Thus, the accusation of insider trading.
There are a couple of remarkable points to this story. First, daily fantasy play, and fantasy sports in general, are considered legal in the United States. Picking game winners or guessing whether a game will produce more or fewer points than predicted is not legal (except in Nevada, Montana and New Jersey).
What’s the difference? The difference is non-existent, or miniscule if you buy the argument of these fantasy leagues. They claim it is not gambling because winning is based on the knowledge of the skills of the players involved.
Of course, the other kind of gambler makes his or her choices based on their knowledge of the quality of teams involved. The pick “overs” and “unders’’ based on what they know about each team’s offense and defense. There is no more knowledge in fantasy play than thee is in picking game winners.
The other aspect of all of this is the money involved, and where it is coming from. DraftKings and FanDuel compete with each other to give out the largest prizes on a daily (with the NFL, it’s more like weekly) basis. Millions are being won, millions.
But not by everyone. Sports Business Journal reports this week that 91 percent of winnings on the two sites are won by just 1.3 percent of contestants. That means most contestants are paying to play a game they are not going to win.
Where are these millions coming from? Well, each of the companies have big-wallet backers: DraftKings can boast investments from 21st Century Fox and Kraft Group, FanDuel has funds from Google and Time Warner.
But where most of the money is coming from is from the guys who don’t win each week. The guys who have full time jobs and do their research on the NFL and other sports when they are supposed to be looking at spread sheets and power point presentations.
And now, we find out that there is a chance those unconnected people are losing their money because some connected people have better information than others.
The second that fantasy football went from a group of buddies competing against each other to an entire nation doing so, the opportunity for corruption arose. The minute companies started offering contestants a million dollars a day, the possibility of wrongdoing arose.
The minute the contests became million dollar propositions, the opportunity for the contests to affect the NFL games became a possibility.
DraftKings and Fan Duel issued a dual press release this week, exclaiming their virtue and intentions to improve their procedures. If two competing companies get together to issue one press release, you have to smell the bacon frying.