Fantasy Sports Business: Permanent Stay in NY
Rick Wolf explains the permanent stay granted in New York and other things in the media this week: scripting, bumhunting and multi-entry play.
MORE POSITIVE NEWS - FLOWING
Today there was the best news since the battle started here in New York. The New York Appellate Court ruled for a permanent stay for FanDuel and DraftKings, allowing them to continue to operate in New York until the court decides on the appeal, which will be, at the earliest, May. The important thing here is that the court had every opportunity to stop FanDuel and DraftKings from operating if they thought that there citizens were gambling or in any danger.
This is great news and there are a lot of opinions on this, but all that really matters is that no one is allowed to wrongly criminalize fantasy sports without due process. There is no question that the rhetoric from the New York Attorney General’s office and their politically-motivated moves have cost the industry a lot of money. Confusion by New Yorkers about whether or not they could play DFS was heightened on December 11th when they sued for an injunction and it was reported EVERYWHERE. Then the Appellate Court granted a temporary stay that no one reported and New Yorkers believed that it was still illegal for them to play on the DFS sites. Now, it is clear that both companies are open for business legally in New York.
The FSTA released the following statement: “Not surprisingly, the Court disagrees with the NY AG and agrees that millions of New Yorkers can and should continue to enjoy fantasy sports during this lengthy legal process. It’s time for the grandstanding and rhetoric to end – and time to embrace the thoughtful and measured approach being adopted in other states.”
Reading between the lines, “the thoughtful and measured approach” means regulation. This will take years to get through all the states. For the industry the states that come first will be the model. Massachusetts has led the charge for months. So we need to watch that closely. There will be a public hearing tomorrow. The Massachusetts Gaming Commission delivered a “white paper” to the legislature today.
Many journalists are still looking to take down DFS and have turned their focus to other issues in fantasy sports: scripting, good players who target beginners and multi-entry tournaments. So let’s make sure everyone understands what they are talking about and what you as a player can do. Then, we will take a look at what is in the states’ regulation plans to combat these things.
THE ACHILLES HEEL
Scripting or Internet robotics is the process by which computers enter lineups or analyze site data in order to determine the best lineups. Since computers process a lot more information quickly, players can set up rules to find the beginner players and/or enter the optimal number of entries into a tournament.
Multi-Entry Tournaments make it harder to figure out the right risk/reward for playing contests. However, with scripting, this can make it very difficult for even a good player using a single lineup to win. Let’s look at yesterday’s millionaire contests on Draft Kings and FanDuel. A person using a script or commercially available tools can submit many entries into tournaments of this size. The contestant can use the software to pare down the player pool. Then the software outputs as many lineups as the player desires and automatically enters them into the tournaments in seconds.
Bum-hunting is defined as “the act of seeking out bad players to play against in poker.” With bigger tournaments and more average sports fans playing, coupled with so much information available about the players in their profiles, it is easier. In poker, a bum-hunter can only play a finite number of tournaments at one time. With scripting or Internet robotics, the number of tournaments you can enter is equal to the number of total tournaments.
BE SMARTER UNTIL DFS OPERATORS SOLVE
So, how do we as an industry deal with the Achilles heel, scripting? The first way, for the near future, is that players need to be educated on what contests to play in order to have success. Cash games are contests where half the fantasy sports players win money and are best for beginners. Single entry games are the best to play in. As a rule, you should play 90% of the amount you are playing on a given day in these Cash games. This will give you 10% to play in the tournaments with more contestants and larger prize pool, if that’s what you like.
For the long-term, the Achilles heel is being addressed in both regulation and by the DFS operators. Almost all operators have beginner contests which are single entry. As far as regulation, each state is reviewing daily fantasy sports based on what they believe is the need of their people. It is important for the leaders of the fantasy sports industry to work with these legislators to make sure that gameplay is protected for the beginner, intermediate and professional player. This is a delicate balance.
Massachusetts, Indiana, California and Florida are looking at ways to license, tax and regulate daily fantasy sports. If you are zealous, Legal Sports Report has done a great job tracking all legislation associated with fantasy sports. The approaches are different so I wanted to lay them out in the simplest possible way with a link to the actual regulation language or bill so you can dig deeper without the disguise of media opinions:
California – The Internet Fantasy Sports Protection Act is a California bill that has provisions for “fairness of DFS Contests” which includes sites’ requirements to recognize the best players with a symbol next to their names in the list of entries so that beginners can identify those who are the upper tier of competitors. California states that it wants to be first with this legislation.
Massachusetts – Attorney General Maura Healey (pictured right) proposed what she thought were the best regulations for daily fantasy sports. These regulations are the most thorough from the state level that I have seen. The regulations are being worked through with industry leaders and we expect that this state’s regulations will reflect what is best for the long-term future of daily fantasy sports play. These regulations cover all three of the above concerns. There is a public hearing on January 12th.
Indiana – The Senate bill (339) has a little more detail, but they seem to be running together. I anticipate all the states learning from each other and Indiana will wait for the others to find all the issues and address them so they can follow.
Florida – The Senate bill has very little regulation in it. In large part, it is to make sure that DFS is stated to be legal so that the state can acquire an onerous licensing fee. The registration fee is $500,000 and $100,000 per year for renewals.
THE TIDE IS TURNING – ROLL TIDE
In Nevada, DFS operators are required to have a gaming license, but it is not ilegal. It is inaccurate to say that in Arizona, Louisiana, Iowa, Montana, New York and Illinois that it is illegal or banned. Neither is true. In Arizona, Louisiana, Montana and Iowa, the laws on the books are either antiquated or unclear so fantasy sports operators exclude play from those states.
In New York today, the New York Appellate Court granted a permanent stay for lawsuits filed against FanDuel and DraftKings by the New York Attorney General. In Illinois, the Attorney General filed an opinion on daily fantasy sports being gambling and encouraged the legislature to rule more clearly on this. It is my opinion that this was an attempt to have the law more clear and not an attempt to criminalize our hobby.