Daily fantasy sports operators are taking a beating on their revenue as the furore over their legality rages on.
DraftKings and FanDuel have been celebrating after being allowed to return to the New York market, but the negative publicity appears to have damaged their popularity.
In NFL Week 15, entry numbers to FanDuel’s guaranteed prize pool games fell for the tenth week in a row.
DraftKings just about managed to arrest a nine-week streak of falling entries to post a slight increase, but the outlook is gloomy for the sites.
Expert data crunchers on superlobby.com calculated that there were $35.5 million in entry fees for guaranteed prize pool games across the daily fantasy sports market in the week (http://superlobby.com/lowdown).
That figure is lower than FanDuel alone used to enjoy before the row about the games’ legality erupted.
The industry was hit by an insider trading scandal in October and has been on a downward spiral since then.
A huge spend on advertising brought the likes of DraftKings and FanDuel to lawmakers’ attention and they were accused of bringing in sports wagering by the backdoor to the 46 states that ban sports betting.
They claim to be games of skill and thus exempt from the 2006 Unlawful Internet Gambling Enforcement Act, which only bans games of chance and not game of skill.
Various politicians and commentators have branded this loophole nonsense and called for a ban on the sites. They were dealt a blow when Nevada said they amounted to sports wagering and said they could not operate until they receive a licence for sports betting.
The worst hit came when New York Attorney General Eric Schneiderman issued them a cease and desist order in the state, where they get around 10% of their business.
They appealed to the New York Supreme Court, where earlier this month Justice Manuel Mendez granted Schneiderman’s request for an injunction on the sites, forcing them to shut down.
DraftKings and FanDuel filed for stay orders with an appellate court to continue operating in the state, which were granted.
But it is only a temporary stay of execution. In January a five-judge panel will review the operators’ appeal and decide whether to let them continue in the state or let Mendez’s ruling stand. Since 2011, 74 of Mendez’s rulings have been appealed and only a quarter have been successful, so the operators could soon lose a tenth of their market.
They will look to expand overseas, but those plans have been delayed while the legal wrangling in the US rumbles on.
In the US the figures aren’t great for them. FanDuel is still the market leader and secured a margin of 10.9% in Week 15 on a turnover of $17.8 million. That equates to a rake of just under $2 million, but entries are tumbling.
DraftKings saw a tiny rise in entry figures – up by just $80,000 on the previous week – but its margin fell dramatically, from 11% the previous week to just 4.75% in Week 15. That means it secured the lowest rake since Week 2.
Meanwhile DraftPot, a minor player compared to DrakKings and FanDuel, enjoyed its best results of the season with a margin of 8.45%. But that is on revenues of just $33,000 – a drop from a season high $235,000 in Week 5, when the legal furore hadn’t really got going. But, as superlobby.com CEO David Copeland noted, that is perhaps an economic reality in an industry that has been hammered in recent weeks.