
Fantasy Sports Employees Bet at Rival Sites Using Inside Information - joshrotenberg
http://www.nytimes.com/2015/10/06/sports/fanduel-draftkings-fantasy-employees-bet-rivals.html
======
icelancer
As someone who worked in the Internet gambling industry and has to sit and see
these Daily Fantasy Sports idiots run their loophole into the ground, I can
only laugh. You can't flout your "legality" in front of a bunch of US
Senators, advertise fraudulent returns, and have zero regulations and expect
to get away with it.

~~~
onewaystreet
Daily Fantasy Sports probably wont go the way of poker for a couple of
reasons:

1\. DraftKings and FanDual are US based companies, most of the big poker sites
were not.

2\. There is an exception for fantasy sports in the Unlawful Internet Gambling
Enforcement Act. You can debate whether Daily Fantasy Sports should qualify,
but unlike poker it is at least starting on legal ground.

3\. Daily Fantasy Sports has buyins from the NFL, NFLPA, individual teams,
ESPN, the major broadcast networks, etc. Lots of peoples' hands have been
greased from all of the money DraftKings and FanDual have been spending on
promotion.

~~~
onwardly
Another reason is that playing DraftKings or FanDuel does actually make
watching football more interesting- you care about games you otherwise
wouldn't care about. Many people will happily continue to lose $10/week for
the benefit of enjoying watching the NFL more.

Online poker isn't as fun when you're consistently losing money- there's no
"outside" benefit.

~~~
aianus
Putting $100 on a specific football match at 1.5% rake is both more fun and
more profitable than DraftKings/FanDuel.

~~~
gregorymichael
Difference is: entering a DFS lineup makes you care about most of the games.

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acconrad
Former Fantasy Sports employee (engineer) here.

My guess is _if_ he did use tournament data from DK to populate a team on FD,
he did it for himself alone. But he _absolutely_ has access to all of the data
they say he did. This is definitely a huge advantage for the big tournaments,
because you need low-percentage ownership players in order to stand a chance
at having a top lineup. It would help to see how the top players picked their
tournament lineups on DK so you could extrapolate that into a team on FD.

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zem
someone please explain like i'm five - according to the wikipedia page,
fantasy football scoring is based on the actual performance of the athletes
you pick in an actual game. therefore, if the games themselves are not fixed,
there should be no possibility of "insider information" \- what information
could the companies running the pool have that the general public do not? the
article didn't make it any clearer.

~~~
jaynos
The advantage is in knowing what percentage of football players are started by
the entire pool entrants. This information is released once that particular
game is started (e.g. % start for NY Giants players would be known to all at 1
PM when their game started and % start for Denver Broncos players would be
released at 4PM when that game started), but was known ahead of time by those
who worked for the company. While these %'s would not be exactly the same
between Fan Duel and Draft Kings, they should be close enough.

How does this all help you win? You can get an average return in a tournament
(e.g. buy in for $10 and win $15 or $20) by playing high point, low variance
players (safe bets), but to win big, you need to play high variance players
(e.g. the wide receiver who will probably score 4 points, but might score
20-30 pts if they have their best week of the year). That said, if everyone
plays the same high variance player, you will be beat by or end up tying with
many other players. So, if I have two high variance players that I think may
have a good week, one who is owned by 8% of teams and one who is owned by 1%,
I am better off playing the 1% player who will put me ahead of the field if he
scores big.

Edit to add information for those that aren't familiar with daily fantasy:

Each player gets a salary and you are working under a salary cap that prevents
you from making a team consisting entirely of "studs" (the top players at each
position). If salary cap is 10X, then the average salary on your team needs to
be X. A "safe bet" like Tom Brady or Aaron Rodgers will cost you close to 2X.
So for every safe bet you need to pick a long shot like Tavon Austin (who
Yahoo tells me was owned by 1.4% of daily fantasy players) with a salary just
over X/2.

~~~
harryh
But if you follow that strategy you might have a +EV but you are very very
likely to lose in any given entry because you only win when all (or most of)
your high variance players come through. And that is, by definition, unlikely.

So this guy won big the first time he tried this? Or maybe he's tried 4 weeks
now and has already won big?

This still doesn't add up.

~~~
swang
You can enter multiple times I believe with different lineups. So you enter
some lineups with high variance low % picked players.

~~~
harryh
But if your system is to pick high variance players that are also
underrepresented on other players rosters how many lineups can there be? I
remain skeptical that this is a viable strategy.

~~~
jegutman
Here's an experiment: Go enter some giant free-roll and a $10 tournament with
a huge guaranteed prize pool. I would bet that the top score (not the average)
in the free-roll will have higher score. Now take the points that each player
scored and their original cost and you can use a variant of the knapsack
problem[1] to figure out the optimal lineup. You'll see that quite often the
optimal lineup wasn't picked by anybody (mostly because the player costs are
pretty good and the optimal lineup sometimes doesn't use the full salary).

[1]
[https://en.wikipedia.org/wiki/Knapsack_problem](https://en.wikipedia.org/wiki/Knapsack_problem)

~~~
harryh
Sure, but how would access to internal data help a DraftKings employee pick
that optimal lineup ahead of time?

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bluecalm
I don't know much about DFS but it seems to me there is a simple solution to
information leakage problem:

1)players construct their line-ups and have a local program compute a secure
hash of it (with some player specific data in it like arbitrary 10 digit
number at the start)

2)only hashes are posted before the game starts (or once a deadline for
submissions is reached or w/e)

3)then a player is allowed to post a matching (to the hash) line-up

Failing to do 3) results in a loss.

Are there any problems with that solution?

~~~
startswithaj
I guess, the trivial inconvenience of the user having to return, recreate the
lineup from scratch and remember the 10 digit number/salt (or pull from local
memory/localStorage if its the same device) . They would have to do this after
the start of the first game but before the end of all the events in the event
group. I.E before winners are calculated. If you didn't force the players to
do this early on, you wouldn't be able to see live rankings which would take
some fun out of it I guess. There would be other problems I guess to with edit
lineup functionality.

It is a good idea though and would certainly curb this kind of thing
happening.

~~~
bluecalm
Of course the hash posting and remembering the digits would be done by a DFS
client you are using. There could also be intermediares to which you "deposit"
your line-ups and they post them for you once the deadline arrives - all is
needed is a line-up matching the hash, no authorization from the player
required.

Editing the functionality is easy as well, you just replace the hash again. It
just requires a local client to do so instead of doing it on the server
directly.

------
slg
I can't imagine these companies will be allowed to exist in the wild west for
much longer. They are either going to need some strong regulations or they are
going to be killed politically. It makes me wonder if the media rush they both
started at the beginning of this football season was a preemptive move of
desperation to cash in as much as possible before the hammer came down.

~~~
barney54
Why? Are they cheating their customers?

~~~
umanwizard
In this case, one of their employees did exactly that.

~~~
Flammy
Arguably they cheated the players of the other site... As the employees were
(rightly) banned from playing the site they were employed by.

That said they acted on knowledge not everyone would have. Similar to inside
trading, but not the same due the unregulated nature of these sites. I'm not
exactly sure what laws that would bump up against, but definitely most
important to these sites who are trying to build consumer trust.

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phillc73
I can't really see the problem here. The employee made a bet. Sure, he used
information not commonly available, but he didn't do it on his own site. And
it was still a bet, not something that was guaranteed to win.

If I was employed by a horse racing trainer, and I happened to know certain
information about the preparation of a particular horse, which the public
hadn't factored into the available odds, and I placed a bet on that horse to
win, there's nothing illegal in that (not in the UK at least). I'm in a
position to act on uncommon knowledge, but I've still placed a bet and there's
no guarantee the horse will win. It happens all the time.

~~~
catshirt
I hope someone with more authority can chime in- but to continue with your
analogy- stocks too are no "sure fire" bet, are yet subject to insider trading
regulations.

so it would seem the certainty of return is irrelevant.

~~~
wodenokoto
With stocks you can know, before the market, that a company is filing
bankruptcy, or that they missed their quarterly target.

I don't see how you can know that a player will hit a home run, before
everybody else.

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0verc00ked
This whole situation was bound to happen. As others have pointed out, this is
an unregulated industry. I think DFS as a whole will be better off as a result
this - since they'll be forced to securely store player pick data that can't
be accessed by anyone other than the contest participant until the contest
starts. FanDuel and DraftKings already have very strict internal rules about
this, but I don't think their tech enforces those rules.. yet. Kind of
surprising really when they're spending $15M a week on ads.

From there, I think the debate will turn into whether employees at one DFS
site should be allowed to play on other sites (actually, that debates already
on).

I, for one, think they should be able to. It gives employees the opportunity
to experience what it's like to be a user of a similar product. It lets them
stay up to date on their competition. And I just think it keeps people
inspired. If you really like this stuff - enough that you want to work at a
company that makes it - I think it's motivating to experience that when you
can't use your own product due to its nature.

However, I'm pretty sure I'm in the minority. I think I actually saw that FD
and DK have already banned their employees (in the wake of this) from playing
on each others sites.

But to me.. that's silly. If you make it impossible for employees at DK to
have access to the data ahead of time and vice versa, then there's really no
unfair advantage. Plus, if their products weren't the exact same (and products
in this industry WILL diverge), then it also wouldn't matter.

~~~
xirdstl
I don't know. They may think it's impossible to have an advantage, but there's
always an incentive to find that loophole. Forbidding employees to play on
others' sites at least disincentivizes it a bit.

Also, I don't think it's too surprising that FD or DK don't enforce their
rules too harshly. As long as they are making a lot of money, why do they
care?

~~~
0verc00ked
That's true - as soon as you close one option, people look for the next one.
I'm still not in favor though. I just feel like it's an over-the-top response
that potentially fails to address the real problem. It won't be too hard for
employees to just use their friend's accounts. If the focus isn't on
preventing access to the data and instead on a misguided attempt to cut it at
the knees, then the problem's still there.. kind of reminiscent of a lot of
bad government policy.

They'll care about it becomes an impediment to them making lots of money,
which seems like right now.

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aianus
The rake is so high on these sites (10%) that it's pretty much a scam whether
they're pulling tricks like this or not.

~~~
Zigurd
Their transaction costs have got to be sky high. Payment processors consider
this high risk. So if it's any consolation, the payment processors take a
significant slice of the rake.

This is why you see fantasy sports succeeding where previous "games of skill"
wagering failed. Fantasy sports draws on the real event for some of the value
to the player, and players will put up with a high rake. Not so much for a
poker room.

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calcsam
Given sufficient commerce, any virtual market will replicate every flaw of
real-life markets.

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smcl
What does "DFS" mean? You're all using it in your comments, but I've only
known it as "Depth-first search" or alternatively a company that sells sofas
in the UK. Google and Wikipedia are similarly stumped.

~~~
ohitsdom
Daily fantasy sports.

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bjacobel
I hope DraftKings and FanDuel followed the advice of a post on HN a few days
ago [1] and made (i.e., didn't re-invest) some money along the way. Something
tells me they're going the way of online poker in the US very soon.

[1]: [https://medium.com/@dhh/making-money-along-the-way-did-
dropb...](https://medium.com/@dhh/making-money-along-the-way-did-dropbox-and-
evernote-heed-the-lessons-of-flip-f5a133fe00d4)

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jimmytucson
As far as I know, ownership percentage is available for any player in your
lineup as soon as the first game begins. In other words, this is information
is already public. That's what makes threads like this possible:
[http://reddit.com/r/dfsports/comments/3n1cdu/fanduel_percent...](http://reddit.com/r/dfsports/comments/3n1cdu/fanduel_percentage_owned_compilation_week_4/)

Even if it were hidden from the public, it's fairly straightforward to reason
that it is stored in a database and that at least one employee has read-access
to that database. I would be more fascinated to learn that no DraftKings or
FanDuel employee ever played DFS without at least looking at their own
ownership data.

~~~
aianus
> As far as I know, ownership percentage is available for any player in your
> lineup as soon as the first game begins. In other words, this is information
> is already public.

Except it's useless at that point because you can't change your lineup. The
employee has the ownership percentage stats before anyone else and before the
first game begins and can use it to craft his lineup.

