Will Fantasy Sports be Sidelined by Insider Trading?

Fantasy Sports is face with now legal questions after the recent allegations of insider trading on FanDuel and DraftKings, this has gotten the attention of officials and also raised a spate of penalty Flags.

Fantasy Sports has been validated by their skill components, they have spread across the many state lines and also into the world of collegiate athletics, an area that has been closed to most forms of gambling. This is because players of fantasy sports rely on tangible results and hard stats, instead of luck of the draw and an vagarious string of numbers.

Contestants will "draft" athletes from a particular league into their teams, and then they pit their line-ups against other teams. Then then log the stats during real games, therefore, players who are in a fantasy line-up will contribute towards their team's overall score, in the end its the team with the most points that wins.

Reports of the allegations of insider trading within the top two Fantasy Sports Operators, questions are being asked about the legality and the need for oversight.

Points to ponder

Recently reports of a DraftKings employee who had mistakenly released the lineup data prior to the days match-ups began. Then it emerged that the same employee joined a contest on DraftKing’s rival FanDual where he won a $350,000 payout.

It is unknown if the employee had access to then data and if it contributed to his win.

Employees of Fantasy Sports and their platforms are not generally allowed to play on their employers sites, but there were no restrictions from playing on other fantasy sports sites, according to a report on LegalSport.

This has now prompted federal and State legislators to probe the level of oversight of Fantasy Sports and the potential for insider trading. It’s hard to forecast what effect this might have on Fantasy Sports future, when we see that the lawmakers are pondering new rules, there is a possibility of it having a negative effect on the games.

Over the short term we could see a reduction of casual interest in the DFS, because news of the allegations could dissuade some people from trying DFS, or regulars continuing to play, however, the industry is strong enough to continue to grow despite this impact.

Despite the negative press and mistrust these allegation of insider-trading, there is hope that this scandal has got the attention of DFS industry and will help major players in the sector to be able to recognize the necessity for external oversight.

The Legal Challenge

External oversight is required for any part of business that "touches on game integrity," said Mr. Derrick Morton, who is CEO of FlowPlay, and that fantasy sports industry should seize the opportunity. He continued that whenever there is billions of dollars to be had, within the context of accountability and low visibility, then there is potential for fraud. The fact that the industry is unwilling or unable to appreciate this basic law of fraud is unfortunate he said.

Mr Morton suggests that although Fantasy Sports has rendered its foundation upon games of skill to skirt the laws banning gambling whether online or off line, these daily games could be in trouble. The weekly format of Fantasy Sports seems to be safer than the DFS format. The DFS is based on taking risks funds.

The efforts of bringing traditional gambling online in the USA, serves a case to study for the DFS Mr. Morton said, and continue to say that DFS can make a strong case for remaining legal compared to pure games of chance, companies that push the daily format, will be looking at a long road that could possibly prove to be costly to continue operating.

Mr Morton said that the largest challenge to face Fantasy Sports would come through the combined effort of traditional casino industry and the regulators with regards to the legality of Fantasy Sports, this will force the operators to fight for a legal status.

Legality Aside

Besides the legality issues and the various challenges Mr. Morton said that we need to question the sustainability of DFS. A report was recently released by McKinsey that concluded that recreational players were essentially pushed out by skilled sharks, and that although it showcased what a uphill battle it is, DFS operators need to stay afloat especially with increasing user acquisition costs, it also showed why DFS remained legal in the USA.

Together with the challenges to keep casual gamers interested in pools that were steadily filling up with sharks, Fantasy Sports platforms also have been plagued with load issues said performance expert, David Jones of Dynatrace.

He said that top Fantasy Football sites experienced major traffic spikes regularly. Regardless if you are a regular daily gamer or weekly gamer the sites will experience a major strike on Sundays. Because users will log on to check on their teams and how they are doing on the weekend games.

Mr. Jones said that the sharp upticks in the traffic can expose substantial issues that are only seen during peak load times. This highlights the importance of doing advance testing from a end-users perspective. This problem is ever present, and some of the top sites need to address it, how often Fantasy platforms should update their features and deliver of content mechanism to be able to stay on top.