Alternative Thinking about the NFL’s Investor Mess, Bill Gross’ Lawsuit, Goldman’s Glencore Moment and the SEC Liquidity Risk Guidelines

October 8, 2015 02:36 PM
The Daily Alpha

“The act, quietly tucked into a bill about seaport security, was lobbied for by counsels and executives for all major sports leagues.”

So there it is…Deadspin explains that an NFL lobbyist joined the Bush White House and worked on crafting the 2006 Internet gambling law and how it would be enforced.

The only reason that fantasy sports are called a “game of skill” is because of lobbyists--again proving that they are a semi-serious news organization with way more integrity than mainstream sports news outlets, Deadspin’s analysis on the ongoing DraftKings’ controversy has gone deeper than what CBS Sports, ESPN, and Yahoo are willing to go.

But then again, Deadspin’s revenue model doesn’t depend on all-in content and contest growth of the daily-fantasy games sector.

This story is going to get much bigger, and it’s important for three specific reasons.

First, this proves an immense amount of collusion between these gambling sites, media organizations, the NFL, team owners, and corporate influence. Big marketing partnerships are all lined up with CBS, Comcast, ESPN, Fox, Google, Time Warner, and the nation’s three largest sports leagues.

The owners of the New England Patriots and Dallas Cowboys – Robert Kraft and Jerry Jones – are both investors, and if that doesn’t make you scratch your head and make you wonder… wait… what?... keep in mind that one of the most iconic families in the NFL have long ties to gambling, even though the NFL’s stance has been immensely hypocritical toward Las Vegas.

Second, there’s a big number of angel, venture, and private equity backers that are part of this movement. How will they react as the broader customer base recognizes that these games are rigged to favor sharks. Roughly 1% of the players are taking home more than 90% of the winnings. It’s what made Conan O’Brien’s spoof SpendKings so fitting.

It’s for suckers.

Third, what does this do to the speculation about a possible IPO for either FanDuel or DraftKings. There was speculation of two huge IPOs pending… ones that would bring the world online gambling… err… games of skill… to the broader market.

Again, there’s no problem with legalized, properly regulated gambling. But it’s comical to the point of frustration that the U.S. government decided which online gambling activities are allowed, and which aren’t.

This is the government picking winners and losers.

There’s little difference here than other lobbyist influenced creatures like the Export-Import Bank, the Green Stimulus Program of 2009, or the decision to allow certain producers to export oil across the Texas border while outlawing the broader nation from doing so.

And we now know where this started: with someone getting paid in Washington, and the NFL – whose commissioner makes more than $30 million each year and is close friends with a large investor in daily fantasy sports – the cause of this train wreck.

“Daily fantasy is not gambling.” That’s what the companies have been insisting from the very beginning, and—legally, at least—they’re correct.”

In another piece, Deadspin explains why there is no quick fix right now, particularly as current regulation suggests that this is not “gambling” and instead a game of skill.

That’s going to come into question as people start to understand how these games were legalized and left unregulated for a decade.

I am going to break into singular first person, because this is very important. Fantasy sports are not a game of skill. I’ve been playing fantasy baseball and football for 15 years, and to argue that it is not a game of chance and luck is ridiculous.

Which is why I applaud Deadspin’s recent editorial that carves up the interconnections between the NFL, league owners, news organizations, and every other person who continues to live in this fantasy world that these “online contests” require as much skill as poker.

Even worse for people who claim this is not gambling. It walks like a duck, its quacks like a duck. It’s a duck. And we’re fine with legal gambling, but don’t insult anyone’s intelligence in the process.

Instead of wagering dollars, you wager DraftKings Dollars, which you can exchange for actual dollars at 1-to-1 parity, just like you can for chips in a casino. In head-to-head games, the websites take 10% of the winnings. That’s called the juice everywhere else… But at DraftKings, it’s a processing fee.

Last year, a team of mine went 15-0 in a standard ESPN league against friends and colleagues. To argue that skill was critical is not true. Trust me, it made no mathematical sense, and I’m 1-3 to start the year in this league in 2015.

First, in an auction draft, I figured out that many players were overvalued and undervalued according to our rules. My league members wasted most of their budgets, and I simply drafted a team of players that in a standard league would have all gone in the third, fourth, and fifth rounds. That made my hard to beat when my fourth running back (in a league that started four running backs) were among the top 20 all season.

That’s not a skill. That’s exploiting rules for personal gain.

Second, it was extremely lucky that in certain weeks, my team won despite being the eighth best performer by points during that period. Third, what is skillful about playing someone who started a player that was on the IR for most the year, or winning a game because my competitor’s quarterback took a knee on the one-yard line instead of running in for a touchdown with a minute left?

Sure, one-day fantasy is a game of skill if you’re very good at building advanced algorithms across an uneven playing field or you are skillful at using inside information on everyone else that isn’t publicly available.

But it requires an immense amount of luck on Sunday, both on your end, and on the failure of your opponents.

Poker requires way more skill and patience. You must calculate distinctive probabilities on the fly, read multiple opponents, recognize patterns of behavior at the table, put up with Phil Hellmuth’s whining, and you’re never playing the same hand over 12 hours. And even then, in an interview with Modern Trader, one former professional player laughed during an interview and said that luck was the most important factor in tournament play.

You know what takes actual skill? Building a damn birdhouse.

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About the Author

Garrett Baldwin is the Managing Editor of the Alpha Pages and the Features Editor of Modern Trader. An author and Baltimore native, he earned a BS in journalism from the Medill School at Northwestern University, an MA in Economic Policy (Security Studies) from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University.