
How the Daily Fantasy Sports Industry Turns Fans into Suckers - scottfr
http://www.nytimes.com/2016/01/06/magazine/how-the-daily-fantasy-sports-industry-turns-fans-into-suckers.html
======
swanson
Funny enough, the automation/optimization/scripting/algorithm aspects of DFS
are a big part of what makes it interesting to me. I have domain knowledge
about sports, so DFS is a better testbed for me to learn and explore these
areas than, say, automated stock trading.

It's a great place to practice linear algebra, machine learning, forecasting
and projection models, web scrapping, data cleaning/normalization, and API
wrangling. And all without needing a brokerage account, minimum account
balance, or transaction fees!

~~~
acconrad
I never thought about it this way, and while you don't have to worry about
brokerage accounts and minimum fees, you have to pay for accurate stats. Using
a place like ProFootballFocus or StatsInc is going to cost you a pretty penny
if you want to scrape an API with up-to-the-second accurate information.

~~~
bcruddy
You don't need "up to the minute" information though. Data can be days old and
still be viable as long as you're using twitter's streaming API to get injury
updates from one of each 32 teams beat writers as they occur. If I'm setting
an NFL lineup on Friday I know the stats haven't had an opportunity to change
in 6 days.

~~~
micwawa
Injury reports are serious wrinkles. Often time players will be scratched
within a few hours before the game. If you are optimizing, you need to account
for this because it sends the backups value much higher than his salary. For
example, last night Rajon Rondo was scratched. His backup Darren Collison, was
in over 80% of the lineups in a FanDuel 50/50 tournament. I didn't have him,
and I lost $2.

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pavel_lishin
> _The difference between the D.F.S. high roller and the blackjack whale, of
> course, is that the whale is trying to take millions from a multinational
> casino corporation and not from the honeymooners from Fresno who are betting
> away at the $5 tables._

I don't understand this bit. What's the difference? The casino is taking money
from those honeymooners; and it's paying it out to the whale. The whale
negotiates rules that are different than those that apply to the honeymooners.
How is this different than the DFS whales?

Is the only difference that FanDuel/DraftKings allow players to engage in one-
on-one challenges, vs. playing against the house?

~~~
jpeg_hero
The idea here is that the casino will be more diligent in not tilting the odds
too much in favor of the whale, because it's the casino's money that is going
to be lost to a game tilted in the whale's favor.

The argument is that in DFS because the whale is winning "other people's
money" well then it's not as bad in the company's view.

But obviously the supply of "fresh meat suckers" is a corporate resource of
the company's that is being exhausted by too much whale fleecing... so they
still police it to an extent, but just not as much.

~~~
slg
>The idea here is that the casino will be more diligent in not tilting the
odds too much in favor of the whale

Allowing scripted entries is one of the biggest examples of this and a huge
differentiator between DFS and casino games like poker. You will very rarely
have an absolute poker novice playing against a skilled shark. The novice will
generally know they are a novice and will enter lower stake games. The shark's
time is money and they will only enter games with high enough stakes to merit
playing. This is completely different for DFS when scripting is allowed. The
sharks can play an almost unlimited number of games against any opponent. If
it is completely automated, there is no reason why the shark can't challenge
the complete novice who is only willing to bet $5.

~~~
danielki
DFS sites _do_ have novice games and ones with limited entries per account,
however. You can choose to enter these.

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cfcef
So the problem with this gambling site, which defends itself as being a game
of skill, is that some players are far more skilled than others and so win
regularly. I see.

~~~
gk1
A game of skill is not the opposite of gambling. See card counting.

~~~
hnal943
His point is that currently in the US "games of skill" are legal where "games
of chance" are not. Fantasy is legal because it is classified as a game of
skill where black jack is not.

~~~
ooemog
Fantasy is legal because of this text of in the UIGEA

`(D) does not include--

`(ix) participation in any fantasy or simulation sports game or educational
game or contest in which (if the game or contest involves a team or teams) no
fantasy or simulation sports team is based on the current membership of an
actual team that is a member of an amateur or professional sports organization
(as those terms are defined in section 3701 of title 28) and that meets the
following conditions:

`(I) All prizes and awards offered to winning participants are established and
made known to the participants in advance of the game or contest and their
value is not determined by the number of participants or the amount of any
fees paid by those participants.

`(II) All winning outcomes reflect the relative knowledge and skill of the
participants and are determined predominantly by accumulated statistical
results of the performance of individuals (athletes in the case of sports
events) in multiple real-world sporting or other events.

`(III) No winning outcome is based--

`(aa) on the score, point-spread, or any performance or performances of any
single real-world team or any combination of such teams; or

`(bb) solely on any single performance of an individual athlete in any single
real-world sporting or other event.

~~~
sjg007
Isn't the whole fantasy thing based on:

`(III) No winning outcome is based-- (aa) "... performances of ... any
combination of such teams;" `

So illegal?

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roldie
Daily fantasy sports are like poker. There is an element of skill in each, and
you'll see the same skilled players win consistently.

However, based on my anecdotal evidence of being a fantasy football player
(but not DFS, admittedly) and having formerly spent lots of time in online
poker rooms, poker involves more skill than DFS. In poker you "play the
player, not the hand." But in DFS, there is no equivalent. So I would argue
poker, a game classified as gambling, involves more skill than DFS.

\--

There is also this article about games of skill. While not completely related,
I find it interesting that casinos are trying to find games that people think
they are more skilled at than the average joe, and can therefore think they
can win. [http://www.npr.org/2015/04/29/403094845/casinos-switch-
out-s...](http://www.npr.org/2015/04/29/403094845/casinos-switch-out-slot-
machines-for-games-of-skill)

~~~
36bydesignBL
From my own experience, poker and DFS involve about the same level of skill
and study to be consistently profitable. DFS just scales more easily. You
said, "In poker you play the player, not the hand. But in DFS, there is no
equivalent." There actually is an equivalent. If you study DFS, you'll find
that there's a cottage industry in figuring out what players will be most
popularly owned in a given slate and then using that information to increase
your own EV (e.g. in a tournament, if you projected Aaron Rodgers and Cam
Newton to score the same number of points but 80% of people would play Rodgers
then you would want to play Cam Newton because _if_ he does go off big time
then you now ahead of 80% of your competitors).

~~~
fleitz
So it's kinda like betting against New York when playing a small market team?

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trequartista
Here's John Oliver's take on the daily fantasy sports industry -
[https://www.youtube.com/watch?v=Mq785nJ0FXQ](https://www.youtube.com/watch?v=Mq785nJ0FXQ)
(probably some NSFW language)

~~~
36bydesignBL
I lose confidence in guys like Oliver and Jon Stewart, because the few times
they talk about a subject I actually know very well, they make misinformed
points that betray their lack of research/experience in that field.

~~~
fmstephe
Can you clarify those statements. I have seen that segment and would be
interested to know about misinformation in it.

Or are you talking about a different segment?

~~~
eudox
I think the parent is talking about the Gell-Mann amnesia effect.

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mschuster91
The usual problem with gambling: regulate it too much and people will flock to
somewhere else, quite often somewhere where the odds are lower towards the
gambler than before.

Like with drugs, booze and smoking: banning is not a solution, especially not
in our hyper-globalized world.

~~~
steve-howard
But on the other hand, gambling can bring serious social ills. Gambling isn't
banned in most places because we don't want you to risk $5 to win $10, it's
banned because of addiction, associations with crime, heavier impact on the
poor, etc.

I don't have a stance on the issue per se, but I do think there are strong
arguments against unrestricted gambling. Unlike the drug war, at least, the
people in hot water are the people making money, not their customers.

~~~
mod
Those same strong arguments might apply to alcohol, as well.

I don't agree with people being told they can't use their money irresponsibly.
It's theirs to spend how they please.

Every poker site & casino I've played at allows self-bans, and we have
treatment programs for problem gamblers just like we do for problem-
everything-elsers.

------
acconrad
I always have to preface these opinions with "I used to work in the industry"
(I was a developer for a site that got acquired by one of the 2 outfits
mentioned), so take this with a grain of salt:

This guy was destined to be a sucker. It's not that DFS turned him into a
sucker, it's that he has a gambling problem - he says this in the beginning of
the article! Why do we need to read further, it's pretty clear from that
statement alone he's not going to do well in the long run just knowing the
psychology of a gambler like that.

And to be frank, he isn't very smart with his money either. He's doing a lot
of things that are increasing his risks and destroying his bank account which
could be fixed with some simple statistics and discipline (which, for someone
with a gambling problem, would be almost impossible).

The way to not lose money like the author is employ many of the same tactics
you would with investing:

* Put in only what you can afford/feel comfortable losing

* Stick with the Kelly criterion[1] and never bet more than 10-20% a day

* Diversify - instead of 1 $20 H2H game like the author, play 10 $1 H2H games and 10 $1 50-50s. Now instead of flipping a coin once to make $40 all or nothing, you get to flip a coin 20 times, and each win gets you $2, which can mitigate some of your losses.

Now to be fair, that last example is a bit inaccurate - because each coin flip
is not an independent flip like in a true coin flip, because if you use the
same lineup, and that lineup performs poorly, it's like having a weighted coin
severely against your favor, but at least with H2H matchups, you know that
some people can bomb worse than you, whereas in 50-50s, since you only have to
do better than half, in a large sample size, you likely won't win any of your
50-50s since the median score is roughly the same across all of them.

My point is two-fold:

1\. DFS doesn't turn people into suckers, they already were suckers/gamblers
and didn't do their homework and practice discipline, which brings me to my
next point...

2\. DFS _is_ a game of skill - for an exaggerated example, it takes a basic
level of competence to choose Tom Brady over his backup, Jimmy Garoppolo. You
can be almost certain he will play, as he's pretty much played every game in
his career except for an injury nearly a decade ago. But DFS is _also
gambling_. We know it is, but saying it's legal gambling won't bring on new
customers. It takes a lot of work to say "100% Legal" all over your site and
still not have people sign up.

The US is a funny country. We don't legalize online poker but we legalize in-
person poker in casinos all across the country. We legalize DFS but not online
poker. Where is the logic in this?

For the HN crowd, if you want to try it and you like sports stick with the
above advice: don't play if you have a proclivity for compulsive or
irresponsible gambling. Don't put a lot in (and only put in funny money,
nothing you would otherwise use for say, your mortgage), and exercise a bit of
statistics and probability theory so you mitigate some of the risk. If you do
that, you won't become a sucker.

[1] Kelly criterion -
[https://en.wikipedia.org/wiki/Kelly_criterion](https://en.wikipedia.org/wiki/Kelly_criterion)

~~~
legulere
Just because someone is predisposed to an addiction doesn't mean that you as
someone that interacts with this person doesn't have any responsibility in
that situation.

For instance in many places bartenders are bound by law to not give more
alcohol to people that are already drunk.

The biggest problem I see with gambling is that the Pareto effect shows an
ugly face there: often it's just economically feasible for the operator
because of the addicts.

~~~
acconrad
This isn't exactly a fair comparison.

Bartenders are bound by law not to give drunks more alcohol because they could
go drive a car and kill someone. A gambler is only hurting himself when he
loses his money.

~~~
Vaskivo
Well, he could also be hurting his family. Imagine a gambler betting the
children's college fund.

The damage is not as impactful and severe, but it is still damage.

But I'm still not convinced about your parents first sentence.

~~~
legulere
Or they might lend some money without being able to pay it back. Or they might
steal money.

But in my opinion the harm an addict can do to others isn't even the only
problem. Addiction is a sickness that needs treatment and help. Addicts are
victims first (at least partly of themselves) and only then can also be
perpetrators.

Living off the problems of other people (by enabling them in their addiction,
not by helping them) to me personally is morally questionable. It might be a
bit of a cultural thing though, as here in Europe there isn't as much emphasis
on the idea that everyone needs to take their luck in their own hands as there
is in the US.

~~~
Vaskivo
Sure, I agree. I also think gambling is a health problem.

I find your last paragraph interesting. I too, am European. But there are lots
of cultures in Europe. To me, the word "responsability" struck me as being
very strong.

As a portuguese, we are sociably incentivised to help each other out but it
usually goes as far as helping a "friend of a friend". We have almost a
"helping out" economy, that I believe comes from the hardships from our
parents and grandparents during the middle of the century. And it's how we
make bonds with each other.

But when someone can't or doesn't want to help, it's OK. The way you phrased
it turned a "could do" and "might do" to a "must do".

------
morgante
If it's gambling, people shouldn't be able to consistently and skillfully win
at it.

Fantasy sports is much closer to the stock market than casinos. There's a lot
of luck and speculation involved, but you can carve out an edge through
skills.

~~~
Balgair
I mean, yes, but poker is without any doubts the poster child of gambling.
Poker defines gambling. Gambling is more than poker, but all that poker is as
a game is also gambling.

But we still have gamblers that can play poker skillfully and do so as a
career. They can win over and over.

Therefore just because something is gambling does not mean that you cannot be
skilled at it and win over and over.

Gambling does not preclude getting an edge through skill. The honeymooners at
the 5$ tables are like peewee footballers while the whales are like
professionals. There are levels of skill in gambling.

~~~
meric
_Poker defines gambling_ , except in China where _Mahjong defines gambling_.

------
coldcode
If you can submit multiple lineups via scripts, how can they not detect this?
Do they use multiple accounts? Or is it just a desire to look the other way by
the companies?

~~~
mattmaroon
It'd be a game of cat and mouse. They would simply start multiple accounts,
start using proxies, different computers, etc. Poker had this problem online.
It was a bigger problem for poker though because in DFS, there's no real edge
from multi-accounting. You don't get extra information like you do in poker.
It's just that a sucker in DFS is getting raked that much more.

It does threaten the long-term viability of the game though. Newbies are going
to come in, get fleeced, and quit.

We need actual legal sports gambling.

~~~
omni
How do you keep getting paid in a system like this though? It seems to me like
it'd be a lot easier to come up with 100 FanDuel accounts than 100 bank
accounts, mailing addresses, credit card numbers, etc. to get paid with.

~~~
mattmaroon
What I used to do when bonus abusing online casinos (not poker) is get people
to sign a limited power of attorney form and give me a copy of their ID, for a
small fee. I would photoshop fake addresses into utility bills as address
verification. I would then buy in and cash out to a method that allowed some
form of transfer. Back then it was PayPal or Neteller.

I am not as familiar with DFS, but I am sure it is doable, and there is enough
money on the line to make it worth doing.

------
cladari
The exemption exists purely from the lobby efforts of the NFL and MLB. The
original bill contained no such exemption. The loop hole was added in
committee.

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radikalus
"Listen, here's the thing. If you can't spot the sucker in your first half
hour at the table, then you ARE the sucker."

------
vincentleeuwen
Interesting read. I don't think its too different from your average financial
market though. Lesson 101 in finance is that money flows from private to
institutional investors. It seems this is the case with DFS too.

------
Animats
The beauty of fantasy sports is that it converts sports fans, a subculture
noted for excessive enthusiasm, into suckers. That's a feature, not a bug.
Think of it as monetization of the sports sucker demographic.

From the industry perspective, they don't care who wins. They're a pari-mutual
operator; the players bet against each other and the house takes a cut, like
horse racing. This is different than casino gambling, where the players play
against the house and the house can lose. That's why casinos don't permit
blackjack card counting. FanDuel doesn't care how you plan your bets.

 _" 91 percent of the prize money was won by a mere 1.3 percent of the
players."_ Right. There's a sucker born every minute.

~~~
rconti
Throw in a few mentions of DFS=D&D, plus a few mentions of HandEgg and Superb
Owl, and you'd have the perfect stereotypical nerds vs jocks rant.

I'm not sure if you read the (excellent) article, but what's going on here is
they lure in rich, sophisticated to make huge, scripted bets across many, many
accounts, giving them privileges 'normal' users don't have, in order to create
huge jackpots and a much larger cut for the DFS site operator. They then use
that take to invest in ads to lure more and more suckers.

------
GeorgeMatthews
Woh! I didn't believe that, Seriously!

------
zw123456
I don't think there is all that much difference between fantasy sports and
wall street. In both cases there is an element of skill (however small that
might be) and luck. In both cases there are people with more skill and
resources that are profiting off less skilled or knowledgeable insiders.
Really it is the same thing almost. Maybe that is what is making NY nervous?
They have a new competitor to wall street /s

------
FussyZeus
Gambling is stupid tax, end of discussion. Anything bigger than poker night
with the fellas and you're going to get screwed, one way or another.

The real suckers are people who still think easy money exists when you aren't
a billionaire.

~~~
kenjackson
It actually seems rational to me in many cases. If your very poor, but not so
poor that a dollar per week makes a huge difference, then buying a lottery
ticket makes sense. While the expected value of the ticket is less than a $1
-- given you only live once -- you're betting on the fact that there is a
slight chance in this one life you might hit it big.

That seems completely rational to me. Especially if the odds of improving your
lot substantially via other means is also low -- and not contingent on the
accumulated $1 you spend on lottery.

~~~
aidenn0
And so is debt-financing of non-necessities by the poor; most of the poor in
the US are already likely to be bankrupted at some point in the next 10 years
(even living fairly frugally they don't get paid enough to cover expenses for
a likely period of unemployment, or a large bill due to unexpected health
problems), so they might as well have fun before that happens.

~~~
bittercynic
If you choose to employ this strategy, be sure to use a type of debt that can
be discharged through bankruptsy.

------
laurentoget
"turns fans into suckers"?

I would think spending time and money watching millionaires wearing shiny
spandex pants give each other brain trauma in billion dollar stadiums paid
with our tax money makes us suckers regardless of the existence of Fantasy
Football.

~~~
knowaveragejoe
I bet you think you're clever with this dismissal of sports and that nobody
who actively enjoys sports is aware of the objective nature of what's going
on.

~~~
jfoutz
I think he means taxpayers are suckers,
[https://www.stlouisfed.org/Publications/Regional-
Economist/A...](https://www.stlouisfed.org/Publications/Regional-
Economist/April-2001/Should-Cities-Pay-for-Sports-Facilities) (older article,
but i believe still true today)

I used to really hate sports, and make fun of people. It took me a long time
to realize i was just an alienating asshole. While not really my thing, i try
to put in a tiny bit of effort to be aware of what's going on in sports, and
it's improved casual relationships a lot. That said, taxes for stadiums is a
pretty bad idea.

~~~
Chris2048
Alienating people by not knowing about sports, or for making fun of them?

~~~
jfoutz
it's hard to quantify, but just my general attitude has made things smoother.
Rather than rolling my eyes and trying to change the subject, i'll try to
listen attentively and engage if i have something to contribute.

I don't have any interest in listening to someone rattle on for hours, but a
minute or two listening to something they're excited about, well, it goes a
long way. A reply like "I'm not much of a sports fan, but that sounds amazing"
is pretty effective. Just let people bask in the glory of whatever they love
for a moment or two, sports, tv shows, how smart their kid is, vacation
pictures, whatever.

I guess, i wouldn't talk to people if they weren't important or interesting in
the moment in some way, taking an interest in what they find interesting makes
me feel more connected somehow.

------
Grishnakh
I don't get it. Weren't sports fans already suckers long before this?

