The Complete Past 6-Month History of DFS, Abridged

(FREE ARTICLE) My opinions about daily fantasy sports (DFS) have evolved over time, with alternating condemnation and praise. My earlier writings are still accessible at BaseballHQ.com. A few more recent works are available here, and here, and here.

Last fall, the proverbial human sewage hit the fan and I started peppering my Facebook newsfeed with annoyingly incessant posts about the DFS circus. Then I got busy, and lost track, and then temporarily lost interest. But anyone who thinks this high level stuff doesn’t affect them is being shortsighted. The industry is changing and recent developments could have far-reaching impact. So, I’m back and have decided on a different tact that I’ll describe later.

But first, for those who have not been paying attention, or have not been able to keep up, here is The Complete Past 6-Month History of DFS, Abridged.

Note that the opinions expressed here – and maybe a few random facts – are mine and mine alone:

The original core argument: Is DFS a game of skill or a game of chance? Simply, it’s both. Despite an outdated carve-out in a 10-year-old law that created the huge grey area that DFS lives in, DFS is – from a purely logical perspective – a gambling game. Still, it does require some skill to play. It’s both floor wax and dessert topping! Results are not completely random, but your odds of success on any single night can be long, especially if you are in a contest where others are allowed to mitigate their risk by entering hundreds of teams.

Teacher: Okay class, please tell me, what is 567 multiplied by 314? Johnny?
Johnny: Um… 15,349?
Teacher: No, I’m sorry. Timmy, how about you? You can have 500 chances.
Timmy (on chance No. 387): 178,038?
Teacher: Yes! That is correct! You are so much more skilled than Johnny!

So, as long as you play the right game – for me, single entry cash games – and realize that “success” really means “Thank goodness I’m able to pay the rent this month,” then you can claim this is a skills game all you want.

Last fall, a Draft Kings employee won $350,000 playing on Fanduel and there were allegations of “insider trading.” Those proved to be unfounded, but the incident alerted the media and state governments that there could be illegal gambling-related activities going on. Anyone within 10 miles of a television would have been well aware that huge amounts of advertising dollars were being spent by the Big Two – Fanduel and DraftKings (let’s call them FanKings). So, while FanKings were proclaiming, “For just pennies a day, you can save this child in Uganda and also WIN MILLION$ OF DOLLAR$,” New York Attorney General Eric Schneiderman was channeling Robert Preston, proclaiming, “Oh, we got trouble right here in New York City. With a capital T and that rhymes with D and that stands for DFS!”

Of course, wherever there is big money, there are fingers looking to grab a piece of it.

The states wanted to know where their cut was.

“We’ll take 8.5%, maybe 14%. Plus half a million dollars up front just to do business in our state. Too much? Okay, let’s say $50,000. That’s fair.”

The casinos wanted to know why those gambling dollars weren’t going to them.

“It’s our business. We want all of it.”

And DFS players planted their stake in the ground as well.

“Hey, I’m not playing your game unless you return at least 90 percent of our entry fees in cash prizes.”

It’s the New Math.

This DFS skills/chance hybrid doesn’t fit neatly into a single category, which is one of the reasons it has gotten into legislative hot water. The states can’t figure out what this mutant creature is (though they can all agree that it spews green, as pictured above), so they’ve been trying to paint the entire industry with a broad brush. Some states have decreed it pure gambling, some states have lumped all forms of fantasy – DFS and full-season – together, and some states are just content to squeeze as much money as they can no matter what the hell this thing is. Every state wants to do it their own way, and that way is badly.

At the core of this mess is a general ignorance about fantasy sports in general and a media-fueled fervor to figure out who the bad guys are and make them pay. You see, the state AGs (more aptly an abbreviation for Aspiring Governors) love to fire up their constituents with hot button topics so they can ride in on their white horse, and “gambling” is always a news bite that gives and gives. Yes, please save us from ourselves!

But us good guys are at a disadvantage. FanKings are the only ones with enough legal and financial resources to fight this battle, but their goal of self-preservation has effectively thrown the rest of the industry – full-season games and smaller DFS companies – under a bus. If a state says, “You’ll have to pay $50,000 just to do business here,” FanKings says, “No sweat, here’s some pocket change.” Pretty much every other company says, “Time to take down the shingle in [Your State Name Here].”

The Fantasy Sports Trade Association, tasked with protecting all industry companies, has recently started separating itself from FanKings. In fact, a separate Small Business Fantasy Sports Trade Association has recently been formed. I expect that we might also soon need a Full Season Fantasy Sports Trade Association.

To date, this had been solely a state issue, but Congress will now be holding a hearing regarding DFS on May 11. More specifically, the Subcommittee on Commerce, Manufacturing and Trade will examine the “nature of DFS as a product and the current legal status of the product.” This could be the day of reckoning. At minimum, it could amp up the stakes.

All in all, you can probably expect this nonsense to continue for the next few years – DFS is not going away – with the likely outcome being higher prices, lower payouts and fewer options. That goes for daily and likely full-season games as well. In the interim, most companies are going about their business as usual as best as they can.

And DFS players? We don’t care about any of it. As long as there is a game being played somewhere, we will find a way to play it. However, those “somewheres” might start becoming fewer and fewer.

Personally, I have no use for a 5-year-old company willing to undermine a 30-year- old industry in order to sustain their greed. But that’s just me. Yes, I know there are investors to pay; I don’t care. I’m only about the big picture. Up until now, we’ve all been able to coexist and grow the pie together, each having a share. FanKings are effectively baking their own pie, which would be perfectly fine if they weren’t also in the process of buying the only oven.

I still play DFS, but I won’t be giving any of my money to FanKings this year. I will only be playing with the smaller companies. RTSports is where Tout Wars Daily has been taking place so that’s as good a place as any to start. You will soon start seeing some promotions here for other smaller sites; there are many to choose from. These sites have fewer contests and smaller payouts than FanKings, but that should be irrelevant to our enjoyment of the game. I hope to help build exposure to this non-FanKings community of DFS sites. I think this is one way to make a statement. Perhaps a grass-roots effort to do the same will help preserve the industry.

We’re just starting. But the point is, DFS is a fine game. Let’s try to save it from itself.

Coming Tuesday: How I came to terms with DFS myself, which might persuade DFS-detractors to give it a shot.

Next Friday:  The nuts and bolts strategy I used last year to win some cash, and without breaking a sweat.