
Payment Processor to Stop Working with Daily Fantasy Sports Clients - Judson
http://www.nytimes.com/2016/01/30/sports/draftkings-fanduel-vantiv-daily-fantasy.html
======
vonklaus
Finally the government is taking action against these companies. Think about
it, these guys provide the ability to wager on the outcome of a basket of
performance statistics. The government is totally right to classify this as
gambling and not skill based wagering. Plus, these things have no underlying
value at all, just structured binary outcomes based totally on short term
results.

What other institution in America is allowed to create non-collateralized
chance options markets out of thin air and float them to the public? This is
unprecedented. These guys are clearing millions. Could you imagine what woild
happen ifit was billions or trillions? I bet that would make for a pretty
volatile environment.

~~~
brwnll
While humorous, this is nonsense, and a complete mischaracterization of what a
stock market actually is.

A stock market is a place where a group of businesses are able to offer
ownership stakes in their company in exchange for cash.

The fact that people have built a speculation market around it is very
different than a gambling wager. If you buy stock and it decreases in value,
you still own the stock.

Edit: As CPLX points out below, in reference to a derivative market, the point
is much more valid.

~~~
CPLX
My assumption was that he was talking about derivatives and synthetic
securities (i.e. "non-collateralized" as he said). If that's the case his
analogy is actually quite reasonable.

~~~
vonklaus
I am talking up structured financial instruments like that. Obviously,
DraftKings doesn't map perfectly to etfs and options, but i think the analogy
stands.

To be clear, I think that skill based wagers should be allowed. I was begging
the question, is there a difference here, and it is:

It is a lot better known how the outcome of a football match will be
determined than other fin. products.

Football is pretty discrete and doesn't have a broad impact on soccer outcomes
(unless you are not American the soccer === football)

This is discretionary capital and not investment money.

So, my sarcastic point was: thanks for protecting me from having fun with $20
i earned weekly, don't you have anything else you might want to look into?

------
csense
Betting on sports teams takes some statistical knowledge and modeling --
there's some skill involved.

Betting on random numbers takes no knowledge -- there's no skill involved.

If the former is illegal and the latter is not just legal, but a business
actually run _by the state_ \-- isn't this hypocritical?

~~~
kartan
Gambling is usually a business run by states as it is like an extra voluntary
tax. Usually the returns are lower than in private run lotteries to make it
less appealing, so the final result is that it is heavily taxed. Also there
are laws that limit how much advertisements you can do. Banning gambling
doesn't looks like it works, people continues gambling in worst conditions.
Letting the state control it allows for more control and it is less profit
oriented as social issues are taken into account. I find it a really good
solution to the problems that gambling has. And it allows people that does
responsible gambling for fun to do it.

~~~
fennecfoxen
With state lotteries not just a matter of _making available_ safe-ish gambling
that's not controlled by organized crime and the like.

It's also a matter of having the State spending _millions of dollars_
advertising gambling at its citizens, reaching out to recruit new potential-
gamblers from among the poorest citizens (+), promising them money beyond
their wildest dreams, instead delivering them variable-reward reinforcement
schedules (well known as the hardest addictions to quit) and a small extra
dose of Poverty every time they're exercised.

There is a massive conflict of interest if lotteries are to be evaluated as a
solution for social ills.

(+) Have you seen how many lottery advertisements there are in Whole Foods?
Have you seen how many there are at a convenience store in a poor
neighborhood, or on public transit, or the like?

------
kriro
Some questionable processors will step in. Stuff will get shut down, money
will be frozen in accounts. This is online poker all over again.

I think DFS has better chances of survival because they have some strong deals
with people that know how to move and shake in Washington (NFL says hi). And
of course this link (John Oliver) needs to be posted eventually when
discussing anything DFS related:

[https://www.youtube.com/watch?v=Mq785nJ0FXQ](https://www.youtube.com/watch?v=Mq785nJ0FXQ)

~~~
jonesb6
Great piece by John Oliver. I wonder what it feels like to work for those
companies..

Lives were surely ruined by this.. how do you sleep with that.

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CPLX
Can we just legalize gambling and be done with all this nonsense. Though it
clearly has some downsides it has to be like the 144,566,786,335th worst thing
that's legal and permitted.

~~~
masterleep
You are possibly under the misapprehension that adults should generally be
allowed to decide things for themselves. This point of view is old fashioned.

~~~
brwnll
Society is nothing more than a collection of people who agree/desire to abide
by a common set of rules. Typically enumerated and enforced by some type of
governing body.

If the American people in general want to live in society with only a subset
of gambling is allowed (which it appears they do), that's exactly the point of
the government.

~~~
vonklaus
Abraham Lincoln had an impossible choice to make, and withoutthe benefit of
hindsite I dont know anyone could have made a better one.

Unfortunately, Allowing states to decide for themselves whether they could
literally own humans or not, lead to a civil war that strategically undermibed
states rights.

So no, it is a lot harder to just 'have a subset' of something. Plus,
obviously the internet is national + global, so while I agree with you I would
argue the governments only role in the matter is arbitration in the event of a
lawsuit as these are simply contracts.

You probably got downvoted because:

> if the American people want...

Is rarely considered.

------
swang
Once the government choked out online poker's resources for paying people it
was all but the end for them.

I imagine it will be similar for DFS. Assuming they cannot find another
processor to take the risk (probably also means high withdraw fees).

As for them replacing $ with bitcoin. You think 95% of the people who play DFS
even know what bitcoin is or will go through with the trouble? People tried
that with online poker, and while I can't tell you how many of those sites are
left, they weren't a good alternative..

------
swanson
A bit surprising after this OTL report came out this week about pro sports
league getting more involved with sports betting:
[http://espn.go.com/espn/otl/story/_/id/14660326/nba-nfl-
mlb-...](http://espn.go.com/espn/otl/story/_/id/14660326/nba-nfl-mlb-nhl-
striking-various-business-deals-gambling-related-firms) as well as positive
results on New York injunctions.

It's interesting to note that Amaya (aka PokerStars) entered the market as the
#3 player last year (via acquisition of Victiv) -- but basically withdraw pre-
emptively during the recent legal dustups, banning players from all states
where DFS is not explicitly legal/regulated. Wonder if their longer-term, slow
rollout might end up playing out in their favor? (personally, I think it
won't; either FD/DK will outlast the legal threats or the whole thing will
explode)

------
nugget
The fall of DFS (if it occurs) will have serious ripple effects. I know
DraftKings alone was spending at least $3 million/day (maybe more) on
advertising at their peak last summer, which would make them one of the
largest digital advertisers in the world. Presumably FanDuel was similar.

~~~
ryanhuff
The biggest ripple for me will be avoiding their brand all over MLB games come
Spring. The product placement was annoying last year.

~~~
beedogs
Annoying and hypocritical. This is the same league that's barred Pete Rose
from the Hall of Fame, and all their scoreboards last year were sponsored by
Draft Kings.

------
brighton36
Might be a nice opportunity for Bitcoin here. Let's see if they take that step
or prefer to go out of business

~~~
grubles
Ssshhhhhh. One mustn't speaketh of bitcoin 'round these parts, less you get
hanged. Nevermind the fact that this is the exact reason something like
bitcoin exists.

------
joaoaparicio
"Regulatory avoidance isn't a good business model."

\- Ron Bernstein, CEO of Intrade

~~~
kolbe
"lol"

-Uber, Amazon, Airbnb, every bank, &c.

~~~
swang
what did amazon do that was skirting the rules?

~~~
kolbe
Collecting sales taxes in most states.

------
Laaw
Can't they just get another payment processor? Aren't there dozens, if not
hundreds, of payment processing companies out there? Surely someone will pick
up these _gigantic_ clients.

~~~
pjsullivan3
There are very few processors in the US that will process this type of risk.
I'm the founder of a lottery app company called Jackpocket and the compliance
/ due diligence is ridiculous. Now that DFS is seen as illegal and toxic its
going to be near impossible to get someone to underwrite this risk. Time for
Bitcoin to shine!

~~~
krinchan
Yes. Because a currency almost completely controlled by Chinese miners who are
strangling the network at 1MB blocks, causing transaction times in excess of
three hours at peak _and_ just introduced the ability to arbitrarily reverse
those transactions during the lag is totally going to handle DraftKings and
FanDuel.

~~~
hybridsole
Yep, they should just stick with the current system of 3-5 day transfers,
giving over all of your personal information, and being subject to
freezing/closure at the whim of authorities with no due process.

Bitcoin transactions rarely take more than 30 minutes, including peak times,
if you apply a sufficient network transaction fee (right now equiv. to $0.05).
It cannot be "arbitrarily" reversed. RBF is not even in production, and
if/when it is, it's is a separate type of transaction that is optional and
marked as such. China does not control bitcoin, yes they perform most of the
mining but it's because China is huge, has cheap electricity, and produces
mining hardware. There are a lot of independent actors involved and if there
was foul play (which there has not been any evidence of) the network could
route around China without too much disruption.

Bitcoin is not perfect and it's still in its infancy, but it is improving and
it is still more censorship resistant and decentralized than any other form of
money.

~~~
krinchan
Ummm...all of the "conventions" about increasing block size had 5 people from
China representing more than 90% of all successfully mined blocks. They won't
let the block size increase because then it'd be too hard to get them across
the Great Firewall.

China is currently an issue and the network won't route around them.

~~~
brighton36
So what? If China stops mining efficiently, then mining will move to the next
country with the cheapest power.

~~~
chillydawg
But they won't stop, because they currently control the only process that
could make them stop.

~~~
hybridsole
That's not really accurate. There are many stakeholders in bitcoin that are
part of the ecosystem and all can determine its future. Mining is one part of
the equation, there are nodes that validate transactions, there are exchanges
that give bitcoins value by providing on-ramps to other currencies, there are
merchants who accept bitcoin for goods/services, there are core developers,
and finally the end users, investors and hodlers. If miners decide to damage
the network through collusion, then it's unlikely the other actors will allow
this for long without altering the code to mitigate the threat. What good are
these ill-gotten coins if exchanges will not give them dollars for it, or
users have no demand for them? Contingency plans have already been developed
for this scenario and, so far, they've not been needed because the miners are
as invested in the long term success in bitcoin as anyone else.

------
listic
What are Daily Fantasy Sports Clients?

~~~
Judson
In this case, they are referring to DraftKings and FanDuel.

~~~
listic
I couldn't figure out exactly what do those do.

------
smaili
Anyone wonder if this may be the final straw that breaks the camel's back?

~~~
colordrops
Which camel?

~~~
smaili
Fantasy Sports

~~~
LargeWu
Correction, Daily Fantasy Sports. Regular ol' fantasy sports, where you manage
a team over the course of the season is specifically legal. The argument
around DFS is that it's not the same as fantasy sports.

~~~
chuinard
No, pretty sure fantasy sports is legal because people do it for fun / a bet
amongst themselves. Maybe I'm wrong but I haven't seen any season-long fantasy
sports sites (like Yahoo) offering millions of dollars in prizes in exchange
for your wager.

~~~
mikeyouse
There was a specific exemption in the Unlawful Internet Gambling Enforcement
Act that allowed for "skill-based" fantasy sports.

See 1,e,ix (or ctrl+f "fantasy"):

[https://www.law.cornell.edu/uscode/text/31/5362](https://www.law.cornell.edu/uscode/text/31/5362)

Fantasy betting is explicitly legal as long as it's skill-based, not dependent
on a spread, and not dependent on a single game.

~~~
chuinard
And this isn't the same law the 1 days are using? Are you suggesting that DK
and FD will end up doing season long paid sports and everyone will be OK with
it?

~~~
mikeyouse
If they did season-long paid sports, everyone would have to be okay with it
since they'd be explicitly legal.. ESPN / Yahoo / CBS all have leagues without
issue. I don't think DK/FD can afford to do the season-long versions without
significant layoffs and restructuring, they're set up like European gambling
houses in terms of staffing and advertising, neither of which are as useful
for season-long versions.

