Betting roundup: DraftKings steps in, bails out shuttered DFS site FantasyHub

After three weeks without access to their money, players from FantasyHub will have their balances restored, thanks to a bail-out deal from DraftKings.

The daily fantasy sports industry co-leader, DraftKings announced Thursday night it would take on FantasyHub’s obligations to both players and charities, a sum of a “few hundred thousand dollars,” according to ESPN’s David Purdum, who broke the story.

“This is not an acquisition deal or an asset purchase deal,” DraftKings co-founder Matt Kalish told ESPN. “This is a very simple deal, where we’re assigning two liabilities from [FantasyHub] over to DraftKings in an effort to do the right thing for their player base, which has a nearly 80 percent overlap with our own. We never want to see our player base go through an experience that’s negative like this. What happened here was reprehensible. It is a breach of trust for these players and we share a lot of these players with them. We just didn’t think it was the right thing to do to sit on the sideline and let that happen. We had the ability to step up and do something.”

FantasyHub, a smaller site founded in Louisville, Ky., and based in Austin, suspended operations on Feb. 19, leaving players with no way to access their funds. Deepening the scandal, anecdotal reports surfaced that FantasyHub hadn’t paid some of the charities that players were told a portion of their winnings and deposits were going to.

DraftKings contacted FantasyHub players via email Thursday night with a notification that they can now withdraw or transfer balances through a page on DraftKings’ website.

FantasyHub is the second site to shut down in 2016 without immediately paying out its players. In January, FantasyUp dissolved, saying it did “not have the funds needed to process the withdrawals to all customers.” The company was later acquired by iTEAM Network, which restored player balances and relaunched the site.

AROUND THE WEB

LOOK WHO’S TALKING

“Jose Fernandez is a great example. Jose Fernandez will strike you out and stare you down into the dugout and pump his fist. And if you hit a homer and pimp it? He doesn’t care. Because you got him. That’s part of the game. … If a guy pumps his fist at me on the mound, I’m going to go, ‘Yeah, you got me. Good for you. Hopefully I get you next time.’ That’s what makes the game fun.” —Bryce Harper on tearing down baseball’s unwritten rules in a wide-ranging profile by ESPN The Magazine.

TWEETS OF NOTE

ODDS & ENDS

  • Whatever your perspective, it was an all around great day for baseball quotes. In addition to Harper’s candid thoughts on the state of the game, we were gifted with Goose Gossage deciding to go in on Jose Bautista and “nerds” in a profanity-filled rant.
  • Some odds and prop bets have been posted for next month’s Manny Pacquiao/Timothy Bradley fight.
  • DraftKings CEO Jason Robins will make an appearance at South by Southwest next week in Austin.
  • At least three NFL GMs have crossed Brent Grimes off their list of possible signings, due to his outspoken wife.
  • Bettors took a brutal loss/miraculous win in the Oklahoma/Iowa State game last night.
  • And bettors who pushed the Fresno State/UNLV line from a pick ’em to Fresno -3.5 were rewarded last night when the Bulldogs took a 13-point win.

ODDSMAKER’S TAKE

“It has been wild, and it pretty much emulates what we’re going to see next week. There is still David and Goliath, but that gap has narrowed so much.” —Sunset Station sports book director Chuck Esposito on this week’s college basketball upsets.

FanDuel alters MLB scoring system; roster configuration remains unchanged

A week after rival DraftKings announced significant changes to its baseball contests, FanDuel has tweaked its scoring system.

The biggest difference is that batters will no longer be penalized with negative points for outs; otherwise, the points rewarded have increased, but ratios remain the same. For example, last season a single was worth one point, a double worth two, etc. This season, a single is worth three points and a double worth six, and so on.

See below for the complete scoring chart.

DraftKings altered its scoring and roster composition rules last week, no longer deducting for caught stealing, subbing a utility hitter for an outfield slot, and dropping the maximum number of players from a single team from six to five.

FanDuel’s roster rules remain unchanged—rosters must be composed of players from three different teams with no more than four players from a single team—and a FanDuel representative said no other changes are forthcoming.

Last summer, FanDuel lost ground to DraftKings, which is partnered with Major League Baseball,  in the ongoing battle for market share, partly due to the popularity of DraftKings’ baseball vertical. Nonetheless, FanDuel remains the industry leader, according to a recently published study, and DraftKings’ relationship with MLB is reportedly tenuous.

OperatorTotal Entry Fees In ($)Total Prizes Out ($)Effective Rake %
DraftKings15,548,74613,934,50010.39
DraftPot102,595104,3265.8
FanDuel*25,529,83122,946,47310.12
FantasyFeud81,15390,978-12.1n
FantasyDraft144,874158,991-12.6
PickChamps446699-56.7
StarsDraft8311,001-21.6
Yahoo493,327463,0006.2

Note: DraftKings also has categories for Hits Against, BB against, Hit Batsmen, Complete Game, Complete Game Shutout, and No Hitter. 

Betting roundup: FanDuel alters MLB scoring

A week after rival DraftKings announced significant changes to its baseball contests, FanDuel has tweaked its scoring system.

The biggest difference is that batters will no longer be penalized with negative points for outs; otherwise, the points rewarded have increased, but ratios remain the same. For example, last season a single was worth one point, a double worth two, etc. This season, a single is worth three points and a double worth six, and so on.

See below for the complete scoring chart.

DraftKings altered its scoring and roster composition rules last week, no longer deducting for caught stealing, subbing a utility hitter for an outfield slot, and dropping the maximum number of players from a single team from six to five.

FanDuel’s roster rules remain unchanged—rosters must be composed of players from three different teams with no more than four players from a single team—and a FanDuel representative said no other changes are forthcoming.

Last summer, FanDuel lost ground to DraftKings, which is partnered with Major League Baseball,  in the ongoing battle for market share, partly due to the popularity of DraftKings’ baseball vertical. Nonetheless, FanDuel remains the industry leader, according to a recently published study, and DraftKings’ relationship with MLB is reportedly tenuous.

CategoryFanDuel 2016FanDuel 2015DraftKings 2016DraftKings 2015
1B3133
2B6255
3B9388
HR1241010
RBI3122
BB3122
R 3122
SB6255
CSN/AN/AN/A-2
HBP3122
OutN/A-0.25N/AN/A
W12444
ER-31-2-2
K3122
IP312.252.25

Note: DraftKings also has categories for Hits Against, BB against, Hit Batsmen, Complete Game, Complete Game Shutout, and No Hitter. 

AROUND THE WEB

  • Japanese baseball’s most prestigious franchise has been rocked by a gambling scandal, forcing the resignation of the team’s top executives.
  • Wednesday was the beginning of free agency season in the NFL, which means loads of fake tweets. ESPN fell pretty hard for one yesterday.
  • Here’s a recap of the deals that actually (probably) did happen, including the Texans agreeing to terms with Brock Osweiler and Lamar Miller.
  • Connecticut lawmakers look to regulate fantasy sports sites.

TWEETS OF NOTE

ODDS & ENDS

Daily fantasy sports scores legislative win, but small sites bemoan looming duopoly

On Monday, Virginia governor Terry McAuliffe signed into law the Fantasy Contests Act, making it the first state to formally legalize daily fantasy sports. It is being hailed as a victory for the industry at a time when bad news outnumbers the good, but some smaller operators are unhappy.

The bill includes a one-time $50,000 licensing and an annual $5,000 regulatory fee. Its broad language also makes no mention of the word “daily,” making it applicable to real-money seasonlong operators as well.

“It really puts us out of business in your state,” David Gerczak, co-founder of a high-stakes, seasonlong fantasy football site, told the Virginian-Pilot.

He’s likely not alone. While the daily fantasy sports market is dominated by behemoths FanDuel and DraftKings, there are dozens of smaller companies that might find $50,000 fees for a single state prohibitive.

“Maybe one or two could try and pony up the dough,” Gerczak told WFYI in Indianapolis. “But when you think about all the states we’re talking about, what they’re trying to do is create this duopoly.”

Indiana could be the next state to make DFS legal. Its bill, which includes identical fees, is currently awaiting the governor’s signature after easily passing through both chambers of the state legislature.

Twenty-three states currently have active legislation that would legalize DFS and introduce some form of regulation. Many of those are seemingly based on the model bill created by the Fantasy Sports Trade Association. The model does not include fees or taxes, but could be amended to include both.

AROUND THE WEB

  • The Nevada Gaming Policy Committee talked about daily fantasy sports at length in Monday’s meeting, which featured an appearance from FanDuel and DraftKings CEOs Nigel Eccles and Jason Robins, respectively. Some six months after the state Attorney General said daily fantasy companies needed to apply for gaming licenses to operate in the state, the committee is considering possible amendments to its current regulatory infrastructure or the creation of a new scheme to deal specifically with DFS.
  • Meanwhile, veteran sports book operator Vic Salerno says his DFS site, US Fantasy, remains on track to be up and running in Nevada and beyond by the start of the 2016 NFL season.
  • A new effort launched to regulate (and tax) DFS in New Jersey.

LOOK WHO’S TALKING

“We got our nuts kicked in.”—BetOnline’s Dave Mason on the losses absorbed by the online book thanks to a pair of upsets in UFC 196 on Saturday.

TWEETS OF NOTE

ODDS & ENDS

Betting roundup: DraftKings tweaks MLB rules

With Opening Day just a month away, DraftKings unveiled changes to its Major League Baseball contest rules Thursday, tightening the limitations on “stacking” and adding a utility position, among others.

Rosters will still be made up of 10 players, including two pitchers and eight hitters, but one roster spot has been changed from a dedicated outfield position to a utility hitter, which can be chosen from any position.

Users will also be limited to five hitters from a single MLB team, one less than previous restrictions, and rosters must include players from two different MLB games. The prior rule stipulated that rosters must include players from three separate MLB teams. The caught-stealing point deduction has also been eliminated.

DraftKings hasn’t commented since the rules were modified Thursday morning, but the changes were a response to player requests, according to a site representative.

Under the new rules, DraftKings MLB contests will more closely resemble those at industry co-leader FanDuel in some ways, but significant differences remain.

Stacking: DraftKings will allow five hitters from a single team; The FanDuel limit is four players (including a pitcher) from a single team.

Roster construction: DraftKings now requires players from two separate MLB games, while FanDuel requires players from three different MLB teams. FanDuel maintains a roster with one starting pitcher slot and eight traditional positions, while DraftKings has two pitcher spots, C, 1B, 2B, 3B, SS, OF, OF, UT.

The sites also diverge quite a bit in scoring.

Scoring at DraftKings:

  • Hitters will accumulate points as follows:
    • Single = +3 PTs
    • Double = +5 PTs
    • Triple = +8 PTs
    • Home Run = +10 PTs
    • Run Batted In = +2 PTs
    • Run = +2 PTs
    • Base on Balls = +2 PTs
    • Hit By Pitch = +2 PTs
    • Stolen Base = +5 PTs
  • Pitchers will accumulate points as follows:
    • Inning Pitched = +2.25 PTs
    • Strike Out = +2 PTs
    • Win = +4 PTs
    • Earned Run Allowed = -2 PTs
    • Hit Against = -0.6 PTs
    • Base on Balls Against = -0.6 PTs
    • Hit Batsman = -0.6 PTs
    • Complete Game = +2.5 PTs
    • Complete Game Shut Out = +2.5 PTs
    • No Hitter = +5 PTs

Scoring at FanDuel:

Hitters Pitchers
1B = 1pt W = 4pts
2B = 2pts ER = -1pt
3B = 3pts SO = 1pt
HR = 4pts IP = 1pt*
RBI = 1pt
R = 1pt
BB = 1pt
SB = 2pts
HBP = 1pt
Out (calculated as at bats – hits) = -.25pt

* * *

AROUND THE WEB

LOOK WHO’S TALKING

“The handle for UFC last year was nearly equal to boxing, which is saying something because we had a really big handle on the Mayweather fight.” —MGM Resorts sports book director Jay Rood, who said this weekend’s UFC event might attract $5 million in handle at MGM’s books.

TWEETS OF NOTE

ODDS & ENDS

Report recalibrates projections, finds uncertain future for daily fantasy sports

Eilers & Krejcik Gaming published new projections for the daily fantasy industry in its 2016 report, and not surprisingly, the picture isn’t quite as rosy as it once was.

The full report is available only to subscribers, but in a truncated version, the report said “it is easy to imagine a number of wildly divergent trajectories for DFS based on political, legal, economic, business model, consumer, and market pressures.”

LegalSportsReport has more info on the full report, including a breakdown of the possible scenarios for the next four years. Most notable: while last year’s report predicted $18 million in entry fees by 2020, the new best-case scenario is around $14 million with the base case sum forecast at around $8 million.

eilers-dfs-projections-2016-1024x683

Citing analyst Adam Krejcik, VentureBeat says DraftKings and FanDuel have now lost their unicorn status, as their value has likely dropped below $1 billion.

2016 could be the industry’s make-or-break year.

“The DFS industry is at a crossroads,” Krejcik wrote. “This year will undoubtedly mark a year of change and transformation. We are witnessing a monumental shift from the status quo, at least from a legal standpoint, which will impact the underlying market dynamics and competitive landscape.”

AROUND THE WEB

LOOK WHO’S TALKING

“In 2013, the (Division of Gaming Enforcement) already authorized our casinos to engage in fantasy sports play. We have regulations on the daily fantasy sports side and have authorized our casinos to engage in that action. They have not chosen to do so. I don’t know why. —Dave Rebuck, director of New Jersey DGE, in a wide-ranging interview with Gambling Insider.

TWEETS OF NOTE

ODDS & ENDS

  • SportsBookReview published its top five online books, as voted on by vistors to its forum.
  • Delonte West spotted loitering outside a Houston Jack-in-the-Box, reportedly shoeless.
  • Kyrie Irving alleges bedbugs, forgoes possibility of Hilton endorsement.
  • The 76ers were the big losers in that nixed three-way trade involving the Rockets and Pistons.

ODDSMAKER’S TAKE

“Every year, there are always a lot of tickets. Now that they’re good, you can basically double that. You get the people that are betting them just because they’re the Cubs and the people who are betting them because they actually think they’re going to win. That’s increased the ticket amount.” —MGM assistant manager Jeff Stoneback on the betting action that has pushed the Cubs as low as 4/1 odds to win the World Series at some books.

FantasyHub ‘temporarily suspending site operations,’ no comment on player funds

FantasyHub, which has stalled on player payments in recent weeks, announced today that it was temporarily suspending operations.

The site announced the suspension in an email to users sent out Friday morning, in which co-founder and CFO Steven Plappert said FantasyHub is “in discussions with a strategic third party regarding the company and are now finalizing decisions.” He said the lack of detailed information and further comment on the matter was based on advice from legal counsel. The full email is included below.

FantasyHub users began reporting payment issues earlier this week on the RotoGrinders forum. In the last two days, a site representative—presumably Plappert, based on the screen name—has posted two messages, neither offering much information.

On the surface, the situation appears similar to the recent saga at FantasyUp, which folded in January with a notice that it didn’t have the money to refund player balances. Soon after, they were bailed out by the iTEAM network, which manages a cadre of sites with pooled liquidity, and players were eventually paid out.

The differences in this case are that FantasyHub is believed to have a substantially larger player base and, unlike FantasyUp, is an FSTA member.

Real-money operators are required by the FSTA to segregate player deposits and winnings from operational funds, but the organization has no oversight powers over its members nor true mechanisms for enforcement.

FantasyHub launched in December 2014 and is based in Austin, Texas. Its point of differentiation in the industry has been its charity focus, but that has now also been called in to question, with some users reporting that charities appearing on FantasyHub’s page have no relationship with the company.

FantasyHub has yet to comment directly on the matter; as of Friday morning it claims to have donated more than $200,000 to various charities.

Here’s the full email from FantasyHub announcing suspension of operations:

Thank you for your patience. We sincerely apologize for the radio silence over the past few days.

Due to advice from counsel, we cannot divulge many details but we have been in discussions with a strategic third party regarding the company and are now finalizing those discussions.

While we can’t say more at this time, we’ll be in touch very soon with full information.

In the meantime, we will be suspending site operations.

Thank you again for your patience and we look forward to reaching out very soon with additional information.

Best,
Team FantasyHub

Another daily fantasy sports site stalling on payments, promises answers by today

For the second time in 2016, a daily fantasy sports site has players on hold, as FantasyHub is reportedly stalling on requested payouts.

[UPDATE: FantasyHub announced Friday it was ‘temporarily suspending site operations’]

Last month, FantasyUp went under, shuttering operations with a notice that it did not have the money to refund player balances. Soon after, they were bailed out by the iTEAM network, which manages a cadre of sites with pooled liquidity, and players were eventually paid out.

FantasyHub is believed to have a substantially larger player base, and unlike FantasyUp, it is a member of the Fantasy Sports Trade Association.

Details on the situation at FantasyHub are scant at the moment. Players began reporting payout delays and unanswered customer service inquiries earlier this week on the RotoGrinders forum. In the last two days, a site representative—presumably Steven Plappert, the company’s co-founder and CFO—has posted two messages, neither offering much information.

Hi guys,

We really appreciate the concerns that you are bringing up and apologize for the radio silence.

I can assure you we will be issuing a formal response very soon and ask if everyone could hold their concerns until this Friday for more information.

Best,
Steven

Hi guys,

Just wanted to reach out again to let you know we are watching things closely here and appreciate all the concerns regarding recent events.

I can assure you, we are working very hard over here 24/7 and will be able to provide clarity soon.

I am sorry this has caused dissent but I encourage everyone to remain calm for just a little while longer.

All the best,
Steven

Real-money operators are required by the FSTA to segregate player deposits and winnings from operational funds, but the organization has no oversight powers or true enforcement mechanism.

FantasyHub launched in December 2014 and is based in Austin, Texas. Its point of differentiation in the industry has been its charity focus, but that has now also been called in to question, with some users reporting that charities appearing on FantasyHub’s page have no relationship with the company.

FantasyHub has yet to comment directly on the matter; as of Friday morning it claims to have donated more than $200,000 to various charities.

AROUND THE WEB

DFS LEGAL BEAT

LOOK WHO’S TALKING

“I did think it was funny, but I kind of hid behind the sofa when I watched it. It was quite painful to watch.”—FanDuel CEO Nigel Eccles on John Oliver’s 20-minute rant on DFS.

ODDS & ENDS

DraftKings tightens purse strings, significantly alters affiliate policy

Confirming weeks of speculation, DraftKings has altered its policy for affiliate marketing sites.

Once billed as “The Best Affiliate Program in Fantasy Sports,” the new terms will significantly reduce the outflow of funds to partners who refer new users to DraftKings and continue the company’s trend of belt-tightening procedures.

[Editorial disclosure: DailyFantasyTalk.com is a DraftKings affiliate partner.]

Closely mirroring recent changes to its refer-a-friend policy, DraftKings’ new affiliate program institutes an array of changes, including placing a cap of $1,000 on how much an affiliate partner can earn per referral per month and aging out players on whom affiliates can earn commission after two years.

It rewards a 40 percent commission on referrals for the first 30 days after an initial deposit, and 25 percent thereafter. Affiliates that fail to refer at least two new players within any 30-day period will have that rate dropped to 15 percent.

Perhaps most damaging of all for affiliate partners:

Further, if the Affiliate fails to acquire a minimum of fifty (50) New Money Players in a sixth (sic) (6) month period, DraftKings reserves the right to immediately terminate this Agreement without notice.

The changes are bound to be unpopular with partner sites, but among industry observers, they were not unexpected. PokerStars made similar changes to its affiliate program and VIP rewards last year, and the general consensus seems to be that with last fall’s marketing blitz, DraftKings outstripped what affiliate partners can offer.

In an “Ask Me Anything” session on Reddit in October, high-volume player Cory Albertson pointed out how much revenue sites may be losing through these deals.

The affiliate model is flawed in that it handcuffs the sites in how much rake they get to see. It’s not necessarily the case that RotoGrinders deserves to get 35% rake forever when someone clicks their link. They deserve some money and have been great for DFS but when so much money is flowing to affiliates it in some ways prevents sites from developing better VIP rewards which are badly needed in DFS right now.

Now, with ongoing legal battles across the country and annual regulatory and licensing fees possibly on the horizon in many states, daily fantasy operators are entering a period of relative austerity, at least compared to the free-spending days of Sept. 2015.

DraftKings recently withdrew from its exclusive marketing deal with ESPN and moved out of its 23,500 square foot penthouse offices in Manhattan. Meanwhile, industry co-leader FanDuel has been hit with two rounds of layoffs already in 2016.

Layoffs at FanDuel the latest evidence of daily fantasy sports industry’s new reality

Bad news just keeps piling up on daily fantasy sports.

With an increasing number of attorneys general saying DFS contests are illegal gambling in their states, the industry is fighting for survival on the legal front. Meanwhile, the optics battle has seemingly already been lost, with numerous arbiters fawning over Tuesday night’s New York Times/Frontline piece that contained few revelations and less cohesion.

Some of this derision, the industry brought on itself. The advertising strategy was the PR equivalent of indiscriminate carpet bombing and anecdotally seems to have turned off at least as many prospective customers as it attracted.

And then there’s the industry’s ongoing insistence that it isn’t gambling—an understandable stance, given the United States’ archaic gambling laws, but not one that’s often going to pass the smell test under the close examination of impartial minds.

All of which is bound to affect the bottom line of the industry’s leading companies, FanDuel and DraftKings, and in the last two days, evidence is mounting that it already has.

On Tuesday, the Boston Globe reported that Twenty-First Century Fox had written down significantly its investment in DraftKings, from $160 million in July to about $65 million in a recent filing with the Securities and Exchange Commission.

Later in the same day, a story broke that the blockbuster marketing agreement between ESPN and DraftKings had been dissolved.

The deal, which epitomized DraftKings’ summer of 2015 swagger, had the company on the hook for a sum reportedly north of $200 million per year. While DraftKings is likely happy to have wriggled free of that commitment, it also represents how swiftly the company has fallen. Along with valuable and pervasive brand integration, the deal included exclusive advertising rights among DFS operators to ESPN’s platforms that could’ve solidified DraftKings’ status as industry leader.

Unspared from the carnage, FanDuel confirmed Wednesday that it will be laying off 55 employees from its Florida branch less than a year after it opened with the hiring of 38 former Zynga employees in May. The Orlando Sentinel reports that the local office will remain open with roughly 20 employees.

“We did have a group of developers in the Orlando office that were focused on (research and development) for ancillary games and applications that we will not be investing in moving forward,” FanDuel told the Sentinel via written statement.

In some ways, the tribulations at DraftKings and FanDuel aren’t unique among their cohorts. The Globe notes that numerous other tech startups have had their value marked down by investors recently, and USA Today reported last month that layoffs at similarly situated companies are on the rise.

Of course, unlike the DFS unicorns, most of those companies aren’t also saddled with an ever-sinking public perception and cascading questions regarding their legal right to do business.

But that doesn’t necessarily mean DFS is doomed. Industry-friendly legislation has been introduced in a growing number of states, and in some is speeding through the legislative process.

That sets the path toward a clearly legal, regulated future, and while six months ago that might have seemed like a consolation prize, at this point it seems more like a best-case scenario.