The NY Times Put Out Another Massive Piece On Daily Fantasy Sports Sites And Got It Completely Wrong
NY Times – In a narrow doorway on Fifth Avenue, a short cab ride from the brand-name stores selling luxury and cachet to the wealthy, a man with the street name Mr. Gold handed a shopping bag to a woman in casual clothes.
The bag contained $350,000 in cash, proceeds from an illegal Internet gambling ring.
This shadowy exchange in June 2012 was remarkable for two reasons: The bag contained $350,000 in cash, proceeds from an illegal Internet gambling ring; and the woman who took it was a New York real estate developer and prominent gay rights activist who has donated nearly a quarter of a million dollars to political candidates and causes. The previous month, the same woman — Joy Tomchin — accepted another bag with $335,000 in cash.
In both cases, Ms. Tomchin said she had taken the cash on behalf of her brother, Stanley, who prosecutors say helped run the kind of gambling operation that has proved so difficult to stop: old-style bookmakers and money collectors, assisted by modern technology that enables offshore computers to record sports bets and payouts, illegal in the United States, beyond the reach of American law enforcement.
In 2006, Congress tried to help prosecutors defeat these criminal rings. With legislators rushing toward adjournment, they passed a bill just after midnight to make it more difficult to gamble on the Internet, and to preserve the integrity of college and professional sports, by prohibiting online payments for illegal bets.
By almost any measure, the law has been a spectacular failure, an investigation by The New York Times has found.
The whole piece is here and is being presented as NY Times’ big report on the shady dealings of daily fantasy sports and will further fuel the angry hoards of people who feel taken by the promise of winning millions in a game of skill. But the article, primarily about illegal offshore betting and highlighted by this anecdote designed to paint a picture of a shady underworld of people lurking to steal your money like some shady criminal activity, only shows how completely out of touch the mainstream media seems to be with their reporting on the issue.
The daily fantasy sports sites have been around for a while now and, while you as a Barstool reader may have seen WAY more about Draftkings than the average person for years, they’ve really only entered the mainstream consciousness this NFL season in which both Draftkings and FanDuel spent over $200 million in ads to be seen anywhere and everywhere. And whether people liked the ads or hated them, there’s no denying that they worked in terms of getting their brands and value proposition out there. And I know because I started playing daily fantasy for the first time in Week 1 this season.
I’ve known about Draftkings while working at Barstool obviously and even ran ads for them with a previous employer years ago but never got tempted to get into it. But when a couple of buddies caved into the ads and wanted to try it, I figured “You know what, sure, seems fun.” I’ve played fantasy football since I was little, played the actual sport growing up and like to think I know a little bit to maybe go a level deeper, and more than anything just have time to kill and already am reading everything and listening to the podcasts so why not?
That first week I played, I didn’t even look at the scoring and played it the same way as I do my normal commissioner fantasy league. I had no clue Draftkings was a full point PPR or had bonuses for 100-yard games for wide receivers and running backs or for QBs throwing for over 300 yards. I tried to get too cute with picks, played Carlos Hyde and the Minnesota Vikings defense even though there’s no logical reason to do that, had no clue what the difference was between all the game types (daily fantasy sports sites have a handful of different games but there are two main ones: A tournament in which a lot of people are in it and you win a lot of money for finishing higher in the standings, commonly referred to as tourneys or “GPPs” for “guaranteed prize pools,” and games in which half the people double their entry fee by finishing in the top half of the game’s standings, known as “50/50s”). I came in thinking I could get by knowing what I know and doing nothing more.
I got destroyed. I can’t find a way to see old games past 30 days on Draftkings but, if memory serves, I lost almost every single game I was in other than one tournament in which I won a nominal amount in the range of $10 risking about $100 in total.
For me it didn’t matter even if it was a shot to the ego, I enjoyed the extra action in games I wouldn’t otherwise care about. For someone else who thought they’d get rich off of this quick investment because they’ve won their fantasy league with guys at the office three of the last five years, it can be a bit of a shock. But what it comes down to is one basic tenet:
You’re not as good as you think you are.
We joke a lot about the Pussification of America on the site and the trope of “everyone getting a participation trophy.” But honestly, that’s where a lot of the problem is. There are smarter people out there than all of us, people who invest a lot of time becoming good at something, who hit that “10,000 hours to greatness” Outliers theory before you’ve even thought about trying it. And with daily fantasy sports, there’s an especially noteworthy curve because the guys who are best at it don’t really want you to FULLY know why they’re the best at it because they’re playing just like you are, they’re competing for the same prize pools. The only way to really compete other than dumb luck is to put in the same amount of effort they do to make it a game of skill combined with risk and reward management and, frankly, the vast majority of people playing DFS aren’t going to do that.
People hate losing. But they especially hate losing if they think the game is rigged. The timing of the scandal around insider trading in the DFS industry is the worst possible thing imaginable for these companies. Draftkings claims an employee accused of using insider information about ownership percentages to win $350,000 on FanDuel never had access to any information that would have helped him. But that’s where the disconnect is. Did he use any data that the public didn’t have? Based on Draftkings’ evidence, probably not. But his very awareness of how DFS works is an advantage because it’s SUCH a hard concept to wrap your head around. The basic knowledge of identifying how to play different lineups alone is the difference between success and bankruptcy; in the aforementioned 50/50 games, you’ll want to play a lineup as risk-averse and close to the same as everyone else in a game. In a tournament game, you’ll likely want to dig deep for just one sleeper but otherwise should go with safer picks who also have a chance for a big game. This is information the average person doesn’t have and would never have unless they read a lot or play and lose and obsess over getting better, neither of which are as easy as shouting “RIGGED!!! PONZI SCHEME!!!!” from the top of their lungs or bombarding Internet comments with vitriol.
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It’s a perfect storm for this daily fantasy sports controversy. A lack of understanding from the public combined with the relatively secretive and defensive way the companies and top DFS players are a major contributor. Gambling and horse racing people — the latter of which, by the way, is the convenient affiliation of the NY Times’ main and completely unaware daily fantasy reporter Joe Drape who couldn’t even figure out how their prize pools are calculated — are jealous because these guys have been operating with full impunity and no regulation while their passion is either illegal or tightly regulated into ghettos and also upset because, yes, there is a degree of skill to gambling as well that the government doesn’t recognize. You’ve got the NFL and MLB in bed with the DFS companies and the NFL’s *cough* sterling reputation being attached to lobbying efforts to stop Congressional hearings on the topic is an awful look too. People with agendas in an area of ambiguity are the worst things for an industry that people don’t understand can have and the outcries for the government to ban it entirely are what results. But it’s a perfect storm that misses the actual situation here.
These are startup companies. Startup companies grow at insane rates, make tons of money, drive tons of traffic online…and no one watches them. Companies become worth billions, then they hire hundreds of people to develop software or sell ads and hire one person who works operationally thinking about how to make sure everything actually works. Building a company that has any actual value in the real world is hard but doing it and keeping an eye on everyone along the way as the company scales beyond your wildest dreams is even harder. It happens every day with startups and you don’t know anything about it. Some bit of code that leaves your informational vulnerable on a financial startup, some employee forgetting to invoice a company and losing the company money, things fall between the cracks. Sometimes people are just forgetful, unprepared, or incompetent. And with a startup being more predisposed to those growing pains, it happens. All the companies in the space are going to have to do a better job of protecting data and safeguarding information to rebuild that consumer trust but just because they haven’t already doesn’t mean it’s a sordid and malicious scheme designed to bilk you out of your life savings. Sometimes you just lose.
As for me, yes, I will keep playing. After I took my beating in week 1 of the NFL season, I took another one the following week in which I lost a little less. By the third week I’d invested enough time in learning and studying relevant data (and embarrassingly watching NFL Game Pass’s All-22 footage) that I broke even. By Week 4, I returned a 60% profit by honing in on a process, continuing to read and learn, and sticking to it. There will be ebbs and flows because even though there is a skill involved, there is a degree of chance. But I enjoy the process, believe in my ability to learn and get better, and maybe one day I’ll make something off of it.
Hopefully all the daily fantasy sports companies will still be around for that to happen.
Disclosure: Draftkings is an advertiser with Barstool Sports but if you read one word of this you’d probably realize this piece was not influenced at all by that partnership.
(Business man yelling at Jamaal Charles’ ACL costing him $200 photo by Shutterstock)