4 ms·

I would like to see the term sheet for this. My guess is that these investors are going to be extracting returns from revenue as it comes in. Here's why... U

I would like to see the term sheet for this. My guess is that these investors are going to be extracting returns from revenue as it comes in. Here's why... UIGEA, [1] the legislation that was used to take down the online poker sites, contained an exemption for fantasy sports. However, that exemption is only valid if the business is operating in compliance with individual state laws. There is an increasing sentiment that DFS is sports gambling under a number of state laws, and many people are just waiting to find out which state will prosecute first. At the time the UIGEA exemption was created, legislators hadn't even contemplated the concept of DFS, and the very legislators that wrote the exemption have expressed concern over it. Since investors with this kind of money have done their due diligence, my guess is that they just want to ride the revenue train until the inevitable state-by-state crackdown occurs. It's no coincidence that this investment is occurring just before football season, which is their biggest revenue driver by orders of magnitude. [1] https://en.m.wikipedia.org/wiki/Unlawful_Internet_Gambling_Enforcement_Act_of_2006 https://en.m.wikipedia.org/wiki/Unlawful_Internet_Gambling_E...

jegutman 11y ago
I am definitely not a lawyer, if you listen to me for legal advice you're an idiot, however: I don't know details, but I think Fan Duels model has had some court tests and it was ruled a game of skill (in a way that poker was not somehow) somehow because you a) picked your lineup and b) there were no random number generators. Here's a few articles: http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-secures-an-important-victory-in-daily-fantasy-sports-lawsuit-however-plaintiff-plans-to-appeal/ http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-s... http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-legal-to-play-fantasy-football-for-money/ http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-leg... That second one seems to specifically mention this clause of UIGEA: "1. In many cases, playing fantasy football for money is entirely legal under federal law. The Unlawful Internet Gambling Enforcement Act of 2006 includes an explicit carve-out for fantasy sports games that meet three criteria: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid; (2) all winning outcomes reflect the relative knowledge and skill of the participants; and (3) the fantasy game’s result is not based on the final scores of any real-world games." So it seems as long as the individual tournaments run have fixed prize pools they satisfy (1), (2) seems to be met because there's still sports knowledge of the sport that can improve performance, and (3) is met simply by their scoring system not having to do with final scores (and includes lots of other stats to help) although this one would probably need a text check to say what "based on the real-world scores" means exactly.
- downandout 11y ago
  The problem is that each state had its on set of laws and definition of what is and is not a game of skill. DFS is legal under federal law; however it may not be under each of 50 different sets of state laws. Additionally, if the state determines that it is illegal, then it becomes illegal under federal law, since that is how UIGEA works. It essentially just puts federal enforcement behind state gaming laws.
  - jegutman 11y ago
    Sometimes the 50 different sets of laws is a feature sometime it's a bug. The spec is pretty terrible.
efsavage 11y ago
(I'm a co-founder of a DFS site) DFS sites already exclude states where the games are not clearly legal (e.g. Arizona, Iowa, Louisiana, Montana or Washington, also Quebec) and have additional restrictions placed on some states (19+ in AL or NE). If a state were to pass a law or make a court judgement against it, we would simply cease operating there. It's possible that some states will do this, although it seems that the sentiment is actually going the opposite direction, but there will be no prosecution. The industry is very proactive about monitoring legal issues.
- downandout 11y ago
  What you are saying is that games of skill are legal in most states. However, there is no guarantee that any or all states won't at least try to make the case that DFS is not a game of skill. Poker sites made the same "skill" argument, and it didn't work out for them. DFS players arguably have less control over outcomes than poker players do.
  - efsavage 11y ago
    Correct. Since there is no legal definition of "games of skill" yet, the industry and its' collective counsel, along with some court cases, have established a set of parameters by which there is a de facto standard for it. If a state wants to define the term, they are free to do so. My personal definition of the term is that a player must perform better than random chance (i.e. you cannot do better at roulette than a randomizer can), and also be able to win consistently, long term (i.e. you cannot beat multi-deck blackjack). We have players that have impressive winning records over thousands of contests. It's possible poker fits this definition and there are people trying to demonstrate it. I certainly know that I am not very good at it!

jegutman 11y ago

I am definitely not a lawyer, if you listen to me for legal advice you're an idiot, however: I don't know details, but I think Fan Duels model has had some court tests and it was ruled a game of skill (in a way that poker was not somehow) somehow because you a) picked your lineup and b) there were no random number generators. Here's a few articles: http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-secures-an-important-victory-in-daily-fantasy-sports-lawsuit-however-plaintiff-plans-to-appeal/ http://www.forbes.com/sites/marcedelman/2013/10/09/fanduel-s... http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-legal-to-play-fantasy-football-for-money/ http://www.forbes.com/sites/marcedelman/2013/09/03/is-it-leg... That second one seems to specifically mention this clause of UIGEA: "1. In many cases, playing fantasy football for money is entirely legal under federal law. The Unlawful Internet Gambling Enforcement Act of 2006 includes an explicit carve-out for fantasy sports games that meet three criteria: (1) the value of the prizes is not determined by the number of participants or the amount of fees paid; (2) all winning outcomes reflect the relative knowledge and skill of the participants; and (3) the fantasy game’s result is not based on the final scores of any real-world games." So it seems as long as the individual tournaments run have fixed prize pools they satisfy (1), (2) seems to be met because there's still sports knowledge of the sport that can improve performance, and (3) is met simply by their scoring system not having to do with final scores (and includes lots of other stats to help) although this one would probably need a text check to say what "based on the real-world scores" means exactly.

downandout 11y ago
The problem is that each state had its on set of laws and definition of what is and is not a game of skill. DFS is legal under federal law; however it may not be under each of 50 different sets of state laws. Additionally, if the state determines that it is illegal, then it becomes illegal under federal law, since that is how UIGEA works. It essentially just puts federal enforcement behind state gaming laws.
- jegutman 11y ago
  Sometimes the 50 different sets of laws is a feature sometime it's a bug. The spec is pretty terrible.

efsavage 11y ago

(I'm a co-founder of a DFS site) DFS sites already exclude states where the games are not clearly legal (e.g. Arizona, Iowa, Louisiana, Montana or Washington, also Quebec) and have additional restrictions placed on some states (19+ in AL or NE). If a state were to pass a law or make a court judgement against it, we would simply cease operating there. It's possible that some states will do this, although it seems that the sentiment is actually going the opposite direction, but there will be no prosecution. The industry is very proactive about monitoring legal issues.

downandout 11y ago
What you are saying is that games of skill are legal in most states. However, there is no guarantee that any or all states won't at least try to make the case that DFS is not a game of skill. Poker sites made the same "skill" argument, and it didn't work out for them. DFS players arguably have less control over outcomes than poker players do.
- efsavage 11y ago
  Correct. Since there is no legal definition of "games of skill" yet, the industry and its' collective counsel, along with some court cases, have established a set of parameters by which there is a de facto standard for it. If a state wants to define the term, they are free to do so. My personal definition of the term is that a player must perform better than random chance (i.e. you cannot do better at roulette than a randomizer can), and also be able to win consistently, long term (i.e. you cannot beat multi-deck blackjack). We have players that have impressive winning records over thousands of contests. It's possible poker fits this definition and there are people trying to demonstrate it. I certainly know that I am not very good at it!