Sportsbook Review.com released a report yesterday covering the fantasy sports betting scandal that practically took the internet off-line.
Between websites like the NY Times, USA Today, and hundreds of websites and bloggers in-between, the scandal received about the same amount of run time as the up till now never-ending procession of fantasy sports advertisements (ESPN has since pulled the plug on DraftKings ads).
One of the emerging discussions from the wreckage is how fantasy sports betting is all that different from sportsbook betting, and why fantasy sports betting websites operate with impunity, while sportsbook executives that served the United States market are being tried in US federal court.
Why Fantasy Sports Betting is treated differently than traditional sports betting
The nuts and bolts of it are that fantasy sports betting received a specific carve-out or exemption from the Unlawful Internet Gambling Enforcement Act of 2006 ("UIGEA"), which made it illegal for sportsbooks, casinos, and poker rooms to knowingly accept wagers from the US, and which tasked banks with blocking gambling transactions.
Fantasy sports met the definition of a skill game and is not prohibited at the federal level, while sports betting, casino, and poker play were considered games of chance. Fantasy sports betting is legal in all US states except Arizona, Louisiana, Iowa, Montana, and Washington.
It is worth noting that UIGEA author Jim Leach is on record to ThinkProgess.org that his intent was not to open the door for fantasy sports betting in the US.
Why DraftKings Scandal differs from Bookies Betting at Sportsbooks
A second prevailing discussion on FantasyGate is why what DraftKings employee Ethan Haskell did is any different than a sportsbook employee wagering with another bookie. (Haskell won $350K at rival site FanDuel, more in yesterday's report).
While both Haskell and a sportsbook employee might have access to information not available to the public and use this information for their own perceived personal gain or edge, the difference is that when wagering at a sportsbook you are only effecting another bookie's bottom-line. A bookmaker might know a sharp bet came in from one of Billy Walter's runners and immediately go wager the same point spread at a rival book, such has happened in the past and despite even the most well-intentioned gaming legislations (such as in the United Kingdom, where sports betting is legal), will likely happen in the future. It would take the machine from "Person of Interest" to catch a bookie asking a buddy to place a bet at another site for him.
The difference is the fact that with fantasy sports betting, you are not wagering against the house on the outcome of a single game. You are one of many entrants in a contest that you believe is on a level playing field, where all contestants are operating with what at most can be public knowledge. There will of course be the sharks, data miners, book-worms, and those who may be sharper than the average Joe, but this is expected. Average Joes don't expect to be betting against the house - the house is already getting their cut.
According to FanDuel spokeswoman Justine Sacco, 0.3% of money won on FanDuel was won by DraftKings, estimated to be at least $6 million based on various sources. Because the contest structure and platform is virtually identical between the two sites, players like Ethan Haskell betting with private market data not available to the public at FanDuel amounts to something that smells an awfully lot like insider trading.
FanDuel and DraftKings released a joint statement yesterday addressing the scandal and have barred employees from wagering at other fantasy sites. While it may be easy enough to flush out employees who violate this rule, identifying friends of these employees or "runners" as they are known in the sports gambling world is a challenge all to its own, and as long as the format of the daily fantasy contests remain unchanged, a single bad apple seriously threatens the integrity of every fantasy contest.