Opinion: Time to take stock of DFS
Bragi Ãgisson, director of daily fantasy sports operator Fanaments, looks at what impact the DraftKings data leak scandal has had on the industry, and what it means for the firmâs plans in Europe
Following the recent insider trading allegations towards DraftKings and FanDuel earlier this month, more questions have been raised about the stability of the daily fantasy sports sector than ever before. [private]
Although the Department of Justice has described their ongoing probe to be in the âpreliminary stageâ itâs clear there will be significant implications. What is unclear is the scale and longevity of the situation.
These accusations are obviously a big PR blow, especially off the back of their recent sponsorship and marketing investments. It was reported that DraftKings spent over $100m on TV advertising in the space of just four weeks.
Due to the extensive global media coverage, itâs the recreational users who could have the greatest impact on the firm as they could now be perceived to lack credibility.
That might create some unease within the marketplace, with concerns raised about other potential untrustworthy activity that could be taking place behind closed doors.
Moving to regulation
In my opinion, DraftKings, which is undoubtedly one of the biggest players in the multi-billion-dollar industry, could have prevented this situation if a proper legislative framework was in place.
In order to protect the consumer, I believe that classifying daily fantasy sports as a betting activity, as opposed to âa game of skill and not chanceâ (even though there is undoubtedly some skill element involved), will help clear the already murky waters.
With no instrument, and therefore legal standard to justify a threshold at which gaming becomes gambling, I am a firm believer that a standard has to be set in order to protect player funds, while maintaining the integrity of the game at all times.
This current loophole ultimately helps them escape the regulation however, Iâm convinced that the short term gains will not outweigh the long-term success of the DFS sector, and perhaps if controlled in the right way other future gambling sectors could prosper.
Fighting back
Understandably, itâs difficult to gauge at this point just how affected DraftKings, FanDuel and their competitors will fair in the coming months, but for me itâs not a matter of if they will bounce back but rather when.
The only stakeholder which could inhibit their revival is the US government. Drastic measures such as redefining the gambling act (UIGEA) with regards to DFS could be a major setback.
Furthermore, US-based DFS companies would stutter once again if they are forced to apply for a license in every state. Not only would this be costly but the laborious process would elongate the current situation.
No matter where one operates, trust is key in the egaming industry and so recent events could certainly have negative implications on DraftKings, which has recently secured a gaming license in the UK.
Crossing the pond
Despite the companyâs intent of adding new sports and welcoming opportunities to forge new partnerships, their UK integration wonât come as easily as they might have hoped after the extensive media coverage of recent weeks.
Therefore European DFS operators must ensure that they hold onto the integrity of their games and the respective operations to ensure an initial competitive edge that the EU customers will appreciate.
Between FanDuel and DraftKings they have gained investment, through venture funding, of over $525m. The scale of backing allows companies of this size to educate the market effectively. Informing the market of who you are and what service you provide is one of the biggest obstacles.
Due to the diversity of Europe, in particular multiple language barriers as well as acute differences in culture, DraftKings will not be able to tackle the EU market in the same fashion that they have done Stateside.
Therefore, I am confident that US daily fantasy companies wonât necessarily dominate the EU gaming space. In fact I am sure that we will see European DFS leaders lead the charge in the market over the next few years.