Column: Daily fantasy contests in trouble without regulation
LAS VEGAS (AP) The incessant commercials promising big money and fun times were by themselves enough to sour millions of Americans on the idea of betting on daily fantasy sports.
And don't be confused, because betting is just what it is. Despite the best efforts of DraftKings and FanDuel to convince everyone that fantasy sports somehow differs from what happens in Vegas because there is more skill than luck in their contests.
Turns out luck and skill may not be the only ways to win. Cheating might also be a way to get some of the shiploads of money the commercials promise.
A burgeoning scandal involving possible insider trading by a DraftKings employee who won $350,000 in a FanDuel contest has shaken the daily fantasy industry to its core. It has exposed some inconvenient truths within the industry and raised questions about whether players are truly getting a fair shake when they enter contests.
That means a lot of nervous executives and owners of the two companies, who until now had little to worry about than counting the millions rolling in.
There should also be some nervous people at Major League Baseball, the NBA and NHL, and with the NFL teams who have partnerships and other deals with the two major sites. They have long taken unbending stands against sports betting, yet had no qualms about jumping in bed with an industry that operates with no controls or regulations.
On Tuesday, MLB released a statement saying it was surprised DraftKings employees were allowed to play in daily fantasy contests. But the real surprise is that no one in MLB - which has a stake in DraftKings - realized the possible quagmire the league was getting into when it invested in a business that made up its own rules.
Another surprise is how badly DraftKings and FanDuel have responded to questions that go to their very integrity. Other than two statements posted online that basically say no one did anything wrong, they have gone silent, refusing to answer questions about who knew when and what they knew.
''It's essentially, `trust us, we're looking into it,''' said Florida attorney Daniel Wallach, a sports law expert.
That is standard procedure for an industry that has insisted up until now that it can police itself and does not need outside regulation. That it's worked up until now is largely due to the failure of the government to step up and regulate daily fantasy sites much the way the stock market or sports betting in Nevada is regulated.
It won't work anymore, something both DraftKings and FanDuel need to figure out quickly. Already two congressmen are calling for congressional hearings to review how a loophole in the Unlawful Internet Gambling Enforcement Act of 2006 has spawned an industry that could take in $4 billion this year without outside controls to ensure there is a level playing field.
''Nobody is in favor of unregulated Internet gambling and that is exactly what daily fantasy is,'' said Marc Edelman, a law professor at Baruch College, City University of New York. ''I am all for daily fantasy. I think it should be legal, but I think it should be regulated and I think it should be taxed.''
It remains to be seen just how much of an industry that depends heavily on bringing in new customers to succeed will be around when the dust settles. Even before the news that a DraftKings employee released a list detailing percentages of ownership on fantasy teams became public knowledge, there were signs that there were cracks in the daily fantasy boom.
A backlash against the commercials turned a lot of people against the industry, and reports that less than 2 percent of players won over 90 percent of the money had others rethinking whether to play. Indeed, the odds are stacked against the casual player, who must go up against big money players who may enter a contest 100 times with different lineups and use computer algorithms to increase chances of winning money.
Sure, the commercials promise million-dollar winners for just a few clicks of the mouse. But the reality is a lot more players lose than win, sometimes for reasons that aren't always fully understood or explained.
The bottom line is that without transparency, the daily fantasy industry is in real trouble.
Without regulation, it's a crapshoot most sports fans would be wise to avoid.
Tim Dahlberg is a national sports columnist for The Associated Press. Write to him at tdahlberg(at)ap.org or http://twitter.com/timdahlberg