DraftKings CEO explains why daily fantasy sports are not a form of gambling

Jason Robins, CEO of the daily fantasy site DraftKings, appeared on ESPN’s “Outside the Lines” on Wednesday to address the swirling rumours and reports of insider trading between DraftKings and FanDuel.

On Monday, The New York Times reported that a DraftKings employee — since identified as Ethan Haskell — had inadvertently released confidential data in the same week that he won $US350,000 on rival daily fantasy site FanDuel. The data reportedly showed the popularity of certain players on the site, and because one’s success in daily fantasy football centrally depends upon the obscurity of certain players, what Haskell did was allegedly tantamount to insider trading.

The news has led to a decision by DraftKings to permanently ban its employees from participating in daily fantasy sports, and the New York Attorney General’s office has reportedly launched an general inquiry into the site and how closely it is regulated.

Robins explained on “Outside the Lines” that Haskell simply made a mistake and that it did not affect his performance in FanDuel. Robins also said that his company had hired its own law firm, GreenBerg Traurig, to independently investigate the situation. When the investigation is finished, DraftKings will publish the results.

During the end of the segment, sports lawyer Daniel Wallach asked Robins to explain how daily fantasy sites like DraftKings are any different than gambling. Robin’s response was an interesting one, and seems to get at the underlying reason why the daily fantasy sports industry has absolutely skyrocketed over the past few months, noting the difference between daily fantasy and more tradition sports gambling, such as point spreads, which are considered chance-based.

Here’s the full quote:

“If you randomly picked against the [point spread] you would be close to 50/50 almost every time. If you randomly picked a fantasy lineup and played against someone who put thought into it, they would beat you 9 times out of 10, if not more. So [daily fantasy is] pretty different, I think, from sports books where even though there is some advantage that can be had, the edges are so minimal that it is primarily chance-based.”

DraftKings and FanDuel have profited in large part because they are not legally considered gambling, and as a result have little to no oversight or regulation. The assertion that DraftKings is a “game of skill” is nominally undeniable, and Robin’s analogy proves that there is truth to it.

However, the sheer semantics of the phrase “game of skill” seems to allow for an argument that poker, say, is also a game of skill, as someone who randomly played poker in a casino would almost certainly lose all of his or her money to someone who put serious thought into poker and played poker seriously. That the binary between gambling and games of skill even exists is the result of an obscure law passed in 2006, and DraftKings and FanDuel are profiting from it. In April, FanDuel was reportedly valued around $US1.5 billion, and in July DraftKings earned a valuation of over $US2 billion.

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