FANTASY SPORTS’ TRIALS AND TRIBULATIONS
Daily fantasy sports, which comedian John Oliver called “the most addictive thing you can do on your phone, other than perhaps cocaine,” are a hot ticket this year. Two industry titans, DraftKings and FanDuel are riding a wave that has become a multibillion-dollar industry backed by the likes of Time Warner and Comcast.
DraftKings
Founded: 2012 Fundraising and ad spending: DraftKings raised $375 million in venture capital in 2015 and spent $80 million on advertising between Aug. 1 and Sept. 15, according to Fortune.
Pool size: Up to $6 million. Entry fees cost anywhere from 25 cents to $5,000-plus.
Leagues to bet on: Draft Kings lets you lay down wagers on games in the four big leagues — the NFL, NBA, MLB and NHL — and then some: college football and basketball, British and North American soccer leagues, the PGA, NASCAR and mixed martial arts.
Investors: Fox Sports, Major League Baseball, the National Hockey League, Major League Soccer, Madison Square Garden Company, Legends and the Kraft Group.
Legal run-ins: As of November, DraftKings is suing its two payment processors, Optimal Payments and Vantiv, for threatening to cut services in New York, a step the fantasy sports site claims amounts to a breach of contract. “The opt-out is understandable; they don’t want to be accused of committing a criminal act,” says Joseph M. Kelly, professor of business law at the State Uni- versity College at Buffalo, referring to New York state’s recent cease-and-desist order to DraftKings and FanDuel, which the attorney general says accepts bets from ESPN’s parent company. An industry-rattling scandal erupted last fall after a DraftKings employee inadvertently released data before the third week of NFL games and promptly won $350,000 at FanDuel the same week. The two daily fantasy sports juggernauts were compelled to release statements defending the integrity of their businesses following allegations akin to insider trading, with employees accused of placing bets based on information generally unavailable to the public.
FanDuel
Founded: 2009
Fundraising and ad spending: FanDuel raised $361 million in venture capital and spent $20 million on ads between Aug. 1 and Sept. 15.
Pool size: Up to $7 million. Entry fees cost anywhere from $1 to several thousand dollars.
Leagues to bet on: NFL, MBA, MLB, NHL and college football and basketball.
Investors: National Basketball Association, Comcast’s NBC Sports, Comcast Ventures, Google Capital, Time Warner, KKR. The NBA’s equity stake now promotes FanDuel through an official one-day fantasy basketball game. FanDuel is partnered with 16 NFL teams and 14 NBA teams.
Legal run-ins: Two Florida men have filed a class-action lawsuit against FanDuel, DraftKings and a coterie of investors, including several major sports leagues. The lawsuit alleges the two companies operated as the “ringleaders” in a scheme where investors “provided legitimacy to the illegal gambling that was occurring and allowed (DraftKings and FanDuel) to conduct unprecedented advertising to attract more bettors.” Among the defendants in the case, which claims negligence, breach of contract and racketeering, are the NBA, MLS, MLB Ventures and NHL Ventures, as well as the Kraft Group, Legends Hospitality — run by New York Yankees owner Jerry Jones (who co-owns the NFL with Robert Kraft) — and several banks, credit card and media companies. As for the insider info scandal, the revelations shone a light on whether a currently unregulated industry can, or will, police itself, on top of questions around internal access to valuable data.