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Fantasy Sports Employees Bet at Rival Sites Using Inside Information

180 points by joshrotenberg 11y ago

slg 11y ago
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 11y ago
  Why? Are they cheating their customers?
  - umanwizard 11y ago
    In this case, one of their employees did exactly that.
    - Flammy 11y ago
      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.
  - AlwaysBCoding 11y ago
    This is just one of many scandals for DFS in the past weeks. DraftKings had to refund all MMA bets on Saturday because of a "data error" -- it was sketchy as hell.
icelancer 11y ago
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.
- npkarnik 11y ago
  I used to think this exactly...but now, given how heavily the NFL, NFLPA, and individual teams have been promoting Draftkings/FanDuel, it's obvious that the business model involves paying kickbacks to all the important stakeholders in the sport. And regarding how relatively chummy the NFL is with elected officials, don't forget that commissioner Roger Goddell's father was both a senator and representative from NY state. That's just one data point, but there are probably a lot of backroom conversations that we don't know about. I think there's too much legitimate money at stake for there to be a online poker-like, "Black Friday" type event for the daily fantasy scam.
  - the_watcher 11y ago
    I agree, but to be fair, the NFL has long known that a huge driver of its popularity is gambling related.
    - DeBraid 11y ago
      This is true, but major leagues have a hostile relationship with sportsbooks in Nevada since the latter keep all the vig, rather than share it with the respective leagues. It appears the DFS executives are paying the right people, whether in broadcasting, sports leagues and/or lawmakers.
      - the_watcher 11y ago
        You're right, the leagues aren't huge fans of sportsbooks, but that's only the official gambling that is going on. There's at least twice as much happening offshore and unofficially.
zem 11y ago
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.
- ddlatham 11y ago
  From the article: The data that DraftKings acknowledged was released by its employee, Ethan Haskell, showed what particular players were most used in all lineups submitted to the site’s Millionaire Maker contests. Usually, that data is not released until the lineups for all games are finalized. Getting it early, however, is of great advantage to make tactical decisions, especially when your opponents do not have the information at all.
  - FanaHOVA 11y ago
    Even with that, you'd still have to be good enough to pick the best roster. I don't think it's as useful as the article makes it sound.
    - icelancer 11y ago
      Huh? You just use the company's internal pricing model and use it on other sites once you know discrepancies. It's not "simple" but it's not genius level derivatives trading, either.
      - iopq 11y ago
        What? I can see the prices of players on DraftKings and other sites as a player. That "internal pricing model" is public knowledge.
        npkarnik 11y ago
calcsam 11y ago
Given sufficient commerce, any virtual market will replicate every flaw of real-life markets.
bjacobel 11y ago
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-dropbox-and-evernote-heed-the-lessons-of-flip-f5a133fe00d4 https://medium.com/@dhh/making-money-along-the-way-did-dropb...
0verc00ked 11y ago
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 11y ago
  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 11y ago
    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.
acconrad 11y ago
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.
aianus 11y ago
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 11y ago
  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.
- swang 11y ago
  Low stakes poker tournaments both live and online have juices >= 10%. See any live tournament up until maybe $500 buyins and $5+0.50 SNGs that you play online. The $1 SNGs are juiced like 25%. People still play them anyways. Not necessarily disagreeing or agreeing with you about 10% of rake being a scam.
jimmytucson 11y ago
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_percentage_owned_compilation_week_4/ http://reddit.com/r/dfsports/comments/3n1cdu/fanduel_percent... 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 11y ago
  > 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.
bluecalm 11y ago
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?
- colordrops 11y ago
  Yes, the problem is that it doesn't allow insiders to rig the game. See bitcoin et al. Good idea though.
- startswithaj 11y ago
  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 11y ago
    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.
- aianus 11y ago
  Or more simply, you could just make the relevant information publicly available in real-time.
phillc73 11y ago
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 11y ago
  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 11y ago
    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.
- rlpb 11y ago
  I have no idea about the legality, but the implications of this might be bad enough for the betting industry that they could ban this themselves. Otherwise the general public might be less likely to want to bet because they know that the insiders will get a disproportionate amount of the winnings, effectively lessening their odds.
  - _xzu 11y ago
    Does someone really think that insider information is not widely used in betting? Every bettor I know, professional or casual, tries to get as much insider tips as possible. Difference is that usually pros have better connections and statistics.
smcl 11y ago
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 11y ago
  Daily fantasy sports.
- deleted 11y ago
  [deleted]
- HerpDerpLerp 11y ago
  It is a place to buy sofas... http://www.dfs.co.uk/ http://www.dfs.co.uk/ not sure of relevence ;)

180 points by joshrotenberg 11y ago

slg 11y ago

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 11y ago
Why? Are they cheating their customers?
- umanwizard 11y ago
  In this case, one of their employees did exactly that.
  - Flammy 11y ago
    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.
- AlwaysBCoding 11y ago
  This is just one of many scandals for DFS in the past weeks. DraftKings had to refund all MMA bets on Saturday because of a "data error" -- it was sketchy as hell.

icelancer 11y ago

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.

npkarnik 11y ago
I used to think this exactly...but now, given how heavily the NFL, NFLPA, and individual teams have been promoting Draftkings/FanDuel, it's obvious that the business model involves paying kickbacks to all the important stakeholders in the sport. And regarding how relatively chummy the NFL is with elected officials, don't forget that commissioner Roger Goddell's father was both a senator and representative from NY state. That's just one data point, but there are probably a lot of backroom conversations that we don't know about. I think there's too much legitimate money at stake for there to be a online poker-like, "Black Friday" type event for the daily fantasy scam.
- the_watcher 11y ago
  I agree, but to be fair, the NFL has long known that a huge driver of its popularity is gambling related.
  - DeBraid 11y ago
    This is true, but major leagues have a hostile relationship with sportsbooks in Nevada since the latter keep all the vig, rather than share it with the respective leagues. It appears the DFS executives are paying the right people, whether in broadcasting, sports leagues and/or lawmakers.
    - the_watcher 11y ago
      You're right, the leagues aren't huge fans of sportsbooks, but that's only the official gambling that is going on. There's at least twice as much happening offshore and unofficially.

zem 11y ago

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.

ddlatham 11y ago
From the article: The data that DraftKings acknowledged was released by its employee, Ethan Haskell, showed what particular players were most used in all lineups submitted to the site’s Millionaire Maker contests. Usually, that data is not released until the lineups for all games are finalized. Getting it early, however, is of great advantage to make tactical decisions, especially when your opponents do not have the information at all.
- FanaHOVA 11y ago
  Even with that, you'd still have to be good enough to pick the best roster. I don't think it's as useful as the article makes it sound.
  - icelancer 11y ago
    Huh? You just use the company's internal pricing model and use it on other sites once you know discrepancies. It's not "simple" but it's not genius level derivatives trading, either.
    - iopq 11y ago
      What? I can see the prices of players on DraftKings and other sites as a player. That "internal pricing model" is public knowledge.
      - npkarnik 11y ago

calcsam 11y ago

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

bjacobel 11y ago

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

0verc00ked 11y ago

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 11y ago
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 11y ago
  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.

acconrad 11y ago

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.

aianus 11y ago

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 11y ago
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.
swang 11y ago
Low stakes poker tournaments both live and online have juices >= 10%. See any live tournament up until maybe $500 buyins and $5+0.50 SNGs that you play online. The $1 SNGs are juiced like 25%. People still play them anyways. Not necessarily disagreeing or agreeing with you about 10% of rake being a scam.

jimmytucson 11y ago

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_percentage_owned_compilation_week_4/ http://reddit.com/r/dfsports/comments/3n1cdu/fanduel_percent... 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 11y ago
> 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.

bluecalm 11y ago

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?

colordrops 11y ago
Yes, the problem is that it doesn't allow insiders to rig the game. See bitcoin et al. Good idea though.
startswithaj 11y ago
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 11y ago
  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.
aianus 11y ago
Or more simply, you could just make the relevant information publicly available in real-time.

phillc73 11y ago

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 11y ago
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 11y ago
  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.
rlpb 11y ago
I have no idea about the legality, but the implications of this might be bad enough for the betting industry that they could ban this themselves. Otherwise the general public might be less likely to want to bet because they know that the insiders will get a disproportionate amount of the winnings, effectively lessening their odds.
- _xzu 11y ago
  Does someone really think that insider information is not widely used in betting? Every bettor I know, professional or casual, tries to get as much insider tips as possible. Difference is that usually pros have better connections and statistics.

smcl 11y ago

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 11y ago
Daily fantasy sports.
deleted 11y ago
[deleted]
HerpDerpLerp 11y ago
It is a place to buy sofas... http://www.dfs.co.uk/ http://www.dfs.co.uk/ not sure of relevence ;)