As someone who worked in the Internet gambling industry and has to sit and see these Daily Fantasy Sports idiots run their loophole into the ground, I can only laugh. You can't flout your "legality" in front of a bunch of US Senators, advertise fraudulent returns, and have zero regulations and expect to get away with it.
I used to think this exactly...but now, given how heavily the NFL, NFLPA, and individual teams have been promoting Draftkings/FanDuel, it's obvious that the business model involves paying kickbacks to all the important stakeholders in the sport.
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.
This is true, but major leagues have a hostile relationship with sportsbooks in Nevada since the latter keep all the vig, rather than share it with the respective leagues.
It appears the DFS executives are paying the right people, whether in broadcasting, sports leagues and/or lawmakers.
You're right, the leagues aren't huge fans of sportsbooks, but that's only the official gambling that is going on. There's at least twice as much happening offshore and unofficially.
Draftkings have been running ads heavily on Saturdays for college football. I think it's more than ESPN; I remember seeing the commercials on CBS as well.
Anyone that wants DFS to go away is almost certainly going to wind up disappointed. Unlike sports gambling, all of the major sports leagues have bought in and decided that this is going to be a major portion of their revenue. DraftKings and FanDuel, in conjunction with the NFL et al will use lobbyists to help draft legislation that makes everything appear kosher while blocking future competition. There is simply too much money to be made, and donated to reelection campaigns and PACs, for DFS to be legislated out of existence.
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.
I read about this in The Facebook Effect, a book by David Kirkpatrick. You can actually read the passage here [1] (beginning at the bottom paragraph of page 241). Basically, Hotmail was blocking friend invites from Facebook altogether on some days, and on those days growth would drop by 70%. So, they cut a deal with Microsoft to unblock them. It stands to reason that they did this with at least some other providers as well, although at the time Hotmail was by far the most important roadblock that they successfully removed.
Daily Fantasy Sports probably wont go the way of poker for a couple of reasons:
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.
Another reason is that playing DraftKings or FanDuel does actually make watching football more interesting- you care about games you otherwise wouldn't care about. Many people will happily continue to lose $10/week for the benefit of enjoying watching the NFL more.
Online poker isn't as fun when you're consistently losing money- there's no "outside" benefit.
Yeah but the regulations around how it is legal is quite bullshit: in order for online gambling to be legal the entirety of your server infra must be within the state lines of either NJ or NV.
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.
Yeah, there's no scare-quotes "legality" here, it's quite explicitly and and intentionally spelled out as legal. It's not some clever interpretation, it's what the law says.
having a relative who used to work in the TV industry decades ago when games were taped all I can say is, insider information has always driven betting
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.
someone please explain like i'm five - according to the wikipedia page, fantasy football scoring is based on the actual performance of the athletes you pick in an actual game. therefore, if the games themselves are not fixed, there should be no possibility of "insider information" - what information could the companies running the pool have that the general public do not? the article didn't make it any clearer.
The advantage is in knowing what percentage of football players are started by the entire pool entrants. This information is released once that particular game is started (e.g. % start for NY Giants players would be known to all at 1 PM when their game started and % start for Denver Broncos players would be released at 4PM when that game started), but was known ahead of time by those who worked for the company. While these %'s would not be exactly the same between Fan Duel and Draft Kings, they should be close enough.
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.
But if you follow that strategy you might have a +EV but you are very very likely to lose in any given entry because you only win when all (or most of) your high variance players come through. And that is, by definition, unlikely.
So this guy won big the first time he tried this? Or maybe he's tried 4 weeks now and has already won big?
But if your system is to pick high variance players that are also underrepresented on other players rosters how many lineups can there be? I remain skeptical that this is a viable strategy.
Here's an experiment:
Go enter some giant free-roll and a $10 tournament with a huge guaranteed prize pool. I would bet that the top score (not the average) in the free-roll will have higher score. Now take the points that each player scored and their original cost and you can use a variant of the knapsack problem[1] to figure out the optimal lineup. You'll see that quite often the optimal lineup wasn't picked by anybody (mostly because the player costs are pretty good and the optimal lineup sometimes doesn't use the full salary).
To clarify, you don't just pick high variance players.
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.
I agree with all of this and I agree that one could probably construct a +EV strategy this way. I'm just surprised that the strategy could pay off so shortly. I would imagine that you'd get a scenario where you had a 1% chance of winning but a payoff of > 100 to 1. So +EV but still likely to take a while to come to fruition.
that edit is very helpful for me, I've recently starting playing fantasy e-sports and I didn't fully understand the proper strategy for salary cap pools.
Let's say that you, zem, are an expert player and you have entered a roster into DraftKings Million Dollar contest.
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.
---
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.
This is the only explanation that makes sense to me. All explanations where that are saying knowledge of ownership %ages in general gives some sort of edge don't really add up.
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.
And to translate that to a potential game strategy, in large contests like these you generally want to zig when everyone else zags. Think of it like a lottery where you know what numbers everyone is playing beforehand. If 100 people bet 12345 and 0 bet 54321, you are better off choosing 54321. It won't necessarily get you a win, but it will help increase you expected value of return by knowing which popular numbers/players it is smart to avoid using.
Not true. If anything, it's even more useful than the article makes it sound. If you knew absolutely nothing about sports, but had access to this data and a fairly basic understanding of probability and statistics, you could use this data to be basically +EV in any large field contest you enter. The lottery analogy by slg is a great metaphor to understand it.
Huh? You just use the company's internal pricing model and use it on other sites once you know discrepancies. It's not "simple" but it's not genius level derivatives trading, either.
The controversy isn't about knowing player price points. That's like the gameboard and it's known to everyone. It's about knowing ownership percentages - which is the overall percentage of lineups in a contest that drafted a certain player.
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.
Yes, I realize that player owned percentages is a huge advantage (to bet against the field thus having a better chance of coming up). But not player pricing.
Those are the advertised pricing for players. If you do not believe that these companies have a private, internal model to set those "prices" to maximize their returns...
No, but the parent comment is not that far off. Their prices are public but with the weight and velocity of betting coming in, it informs them what the lines probably should be instead.
Except Draft Kings lets you enter 1,000 games per week so one can use portfolio theory with this information to increase the expected value of playing.
so it's basically using the "wisdom of the crowds" that play on the DraftKings site to put together a really good pick? that still seems like it shouldn't count as equivalent to insider information, because it's aggregating a bunch of guesses that have no information either.
No. If 60% of people pick Player X, his value goes down. This is parimutuel betting. You don't want significant overlap if you can help it; how would you beat the crowd otherwise?
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.
This isn't quite parimutuel, because in that system all the bet totals are published in nearly-real-time. If you wait until 1 MTP to place your bet you have a very good idea what the odds will be. It isn't obvious to me why the sports gambling sites need to keep this information secret, other than to create exploitable situations like those described in TFA.
They don't need to keep the information secret. They could operate just like pool betting if they wanted to. The problem comes when the information is kept private but insiders can see it. This would be equally bad for pari-mutuel betting.
"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.
A spokeswoman for DraftKings said Haskell simply made a mistake and that the company was certain that he did not use the information improperly. She declined to go into specifics about the safeguards or the company’s auditing policies."
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?
so he was trying to bet on which way the odds would be placed and get in ahead of that, with some sort of hedging that would work regardless of how the games turned out? i have a feeling there's some key insight i'm missing here - is this like placing a bet on a dark horse before the public catches on and the odds swing closer to even?
In the late 90s, I knew a guy who ran a free "pick the winner" football web site. He said he did it because of the phrase, "the masses are the asses", which means that the general public as a whole bets incorrectly and loses a majority of the time.
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.
I'm not sure this still holds true with the advent of betting exchanges. The market is now pretty efficient. Sure, there's still value to be exploited if you're good enough. However, in general the wisdom of the crowd is quite close to the true odds, at least at the short end of the market.
"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"
I think when assembling a team on these websites that you get some fixed amount of cash to buy players to put on your team. The website uses the data on how many people play each football player to generate the cost of these players. I think this means then that employees can use this understanding of the value of players and the relative frequency that they are chosen to pick smarter.
I think in general, one would benefit from accurately picking players with great expected values who are also generally under-picked.
I don't know much about DFS but it seems to me there is a simple solution to information leakage problem:
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
I guess, the trivial inconvenience of the user having to return, recreate the lineup from scratch and remember the 10 digit number/salt (or pull from local memory/localStorage if its the same device) . They would have to do this after the start of the first game but before the end of all the events in the event group. I.E before winners are calculated. If you didn't force the players to do this early on, you wouldn't be able to see live rankings which would take some fun out of it I guess. There would be other problems I guess to with edit lineup functionality.
It is a good idea though and would certainly curb this kind of thing happening.
Of course the hash posting and remembering the digits would be done by a DFS client you are using.
There could also be intermediares to which you "deposit" your line-ups and they post them for you once the deadline arrives - all is needed is a line-up matching the hash, no authorization from the player required.
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.
I can't imagine these companies will be allowed to exist in the wild west for much longer. They are either going to need some strong regulations or they are going to be killed politically. It makes me wonder if the media rush they both started at the beginning of this football season was a preemptive move of desperation to cash in as much as possible before the hammer came down.
Arguably they cheated the players of the other site... As the employees were (rightly) banned from playing the site they were employed by.
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.
This is just one of many scandals for DFS in the past weeks. DraftKings had to refund all MMA bets on Saturday because of a "data error" -- it was sketchy as hell.
I can't really see the problem here. The employee made a bet. Sure, he used information not commonly available, but he didn't do it on his own site. And it was still a bet, not something that was guaranteed to win.
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.
I hope someone with more authority can chime in- but to continue with your analogy- stocks too are no "sure fire" bet, are yet subject to insider trading regulations.
so it would seem the certainty of return is irrelevant.
Horse racing (and other sports) insider information is an odd edge case in betting. You can't get rid of it, since the owner/trainer will always know more than the public. So it is grudgingly accepted. Using it as justification for other, preventable insider-information abuse is plain wrong.
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.
I have no idea about the legality, but the implications of this might be bad enough for the betting industry that they could ban this themselves.
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.
Does someone really think that insider information is not widely used in betting? Every bettor I know, professional or casual, tries to get as much insider tips as possible. Difference is that usually pros have better connections and statistics.
This whole situation was bound to happen. As others have pointed out, this is an unregulated industry. I think DFS as a whole will be better off as a result this - since they'll be forced to securely store player pick data that can't be accessed by anyone other than the contest participant until the contest starts. FanDuel and DraftKings already have very strict internal rules about this, but I don't think their tech enforces those rules.. yet. Kind of surprising really when they're spending $15M a week on ads.
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.
I don't know. They may think it's impossible to have an advantage, but there's always an incentive to find that loophole. Forbidding employees to play on others' sites at least disincentivizes it a bit.
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?
That's true - as soon as you close one option, people look for the next one. I'm still not in favor though. I just feel like it's an over-the-top response that potentially fails to address the real problem. It won't be too hard for employees to just use their friend's accounts. If the focus isn't on preventing access to the data and instead on a misguided attempt to cut it at the knees, then the problem's still there.. kind of reminiscent of a lot of bad government policy.
They'll care about it becomes an impediment to them making lots of money, which seems like right now.
Their transaction costs have got to be sky high. Payment processors consider this high risk. So if it's any consolation, the payment processors take a significant slice of the rake.
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.
Low stakes poker tournaments both live and online have juices >= 10%. See any live tournament up until maybe $500 buyins and $5+0.50 SNGs that you play online. The $1 SNGs are juiced like 25%. People still play them anyways.
Not necessarily disagreeing or agreeing with you about 10% of rake being a scam.
What does "DFS" mean? You're all using it in your comments, but I've only known it as "Depth-first search" or alternatively a company that sells sofas in the UK. Google and Wikipedia are similarly stumped.
I hope DraftKings and FanDuel followed the advice of a post on HN a few days ago [1] and made (i.e., didn't re-invest) some money along the way. Something tells me they're going the way of online poker in the US very soon.
As far as I know, ownership percentage is available for any player in your lineup as soon as the first game begins. In other words, this is information is already public. That's what makes threads like this possible: http://reddit.com/r/dfsports/comments/3n1cdu/fanduel_percent...
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.
> As far as I know, ownership percentage is available for any player in your lineup as soon as the first game begins. In other words, this is information is already public.
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.
