Fantasy sites feel heat from ad blitz, ‘insider’ scandal
Fantasy sites feel heat from ad blitz, ‘insider’ scandal
Speaking to a crowd of fantasy sports companies in January, a Washington lobbyist gave some urgent advice.
Be careful, he told them. If the companies got too aggressive with advertising of daily fantasy sports, they could face harsh blowback from those who might want to crack down on them.
“Everybody needs to really think about who’s listening when you speak,” the lobbyist, Tom Walls, told the convention crowd. “We speak in advertisements. We speak in the press. Use good language. Avoid language that could lead to this further confusion of fantasy sports and betting. This is the stuff that will be weapons for people who want to pass unwelcome legislation about fantasy sports.”
It was a hard line to walk for companies that are offering big cash prizes to customers who want to risk money on sports.
For starters, Walls made his remarks at a fantasy sports industry conference in Las Vegas — on the same floor where gamblers were making legal sports bets at the Bellagio hotel-casino.
Several months later, daily fantasy companies DraftKings and FanDuel started blitzing the airwaves with ads bragging about how much money they pay out.
Neither company is profitable yet. So they were making a gamble of their own, hoping big spending on advertising now will bring more revenue later. But it backfired. The ads got too much attention, in- cluding from lawmakers.
Among them is a California assemblyman, Adam Gray, who has introduced a bill to oversee the industry. His bill seeks to make sure the state is not subject to an unnecessary and unprecedented expansion of gambling and that it is “not deprived of revenues to which it would otherwise be entitled from these activities.”
“Like everyone else, Assemblyman Gray noted that almost every other ad during the opening weekend of football promoted fantasy gaming online,” Gray’s chief of staff
“What happened ... is probably the single greatest engine towards regulation we’re going to have.”
Daniel Wallach, an expert in sports and gaming law
Mike Lynch said. “His interest is to ensure a level of consumer and law enforcement protection.”
That’s exactly what these companies were trying to avoid. After operating largely without regulation, they now face possible fees, taxation and rules they haven’t had to deal with, if not some sort of ban.
The heat intensified this week when it was learned a DraftKings employee had won $350,000 in a contest on FanDuel. The same employee had inadvertently leaked insider data about which players were the hottest to own that week — information that could be used to identify market inefficiencies and improve one’s chances of success against the field.
The companies said there was no evidence of wrongdoing, but New York Attorney General Eric Schneiderman has launched an inquiry in response.
“What happened over the last few days is probably the single greatest engine towards regulation that we’re going to have,” said attorney Daniel Wallach, an expert in sports and gaming law.
Federal law allows paid fantasy sports under certain conditions, including having it reflect the skill of the participants, instead of pure luck like traditional gambling. In exchange for an entry fee, daily fantasy sports companies generally offer fans a chance to win daily cash payouts based on the statistical performance of athletes in games that day or week.
But the explosive growth of daily fantasy sports wasn’t foreseen at the time this law passed in 2006. FanDuel alone is valued at more than $1 billion and re- ported 1.2 million users in 2014.
Now that growth is in jeopardy. Both companies scrambled to answer questions about what they were doing to prevent similar situations that could easily scam its customers out of millions. They even hired outside law firms to review their internal controls against fraud.
“DraftKings’ explosive growth is a testament to our ability to deepen our fans’ engagement with the sports they love,” the company said. “We are committed to reinforcing the trust and security of our millions of loyal customers.”