Maura Healey played basketball at Harvard and 2 years professionally in Austria, before return to the US to get her law degree.
In 2015, when Massachusetts Attorney General Maura Healey first proposed regulating the daily fantasy sports industry, Boston-based DraftKings praised her efforts. At the time, Healey’s move was seen as a way to protect a billion-dollar Boston area corporation.
The Massachusetts AG’s DFS regulation policy came at a time when DraftKings and FanDuel were struggling against a wave of state attorney generals who wanted either to ban daily fantasy sports. Maura Healey’s suggestions therefore seemed moderate and constructive.
DraftKings Fights Maura Healey’s Proposals
Now that Healey’s proposals have been released to the public, DraftKings and FanDuel are fighting some of the regulations. They see one set of regulations as a particular threat to their business operations. If imposed, it would severely limit the DFS companies’ profits in Massachusetts. What’s worse: the regulations could become a model for other US states.
Most of the proposals are standard consumer-protection regulations, which the DFS companies do not oppose. One portion of the bill involves a ban on DFS gaming under the age of 21, a proposal which DraftKings and FanDuel do not like.
Not only does the underage gambling ban hurt profits, due to the loss of revenues from DFS gamers age 18 to 20, but it also sets a standard casino’s use. DFS sites want to avoid any direct comparison with the gambling operation.
Computer Scripts and Optimization Software
Whatever chagrin those companies have with the under-21 proposal, though, they have nothing to provisions which would keep high-volume DFS competitors from using computer scripts and optimization software to enter hundreds, if not thousands, of contests with relatively little ease.
It is often cited that 91% of winnings in daily fantasy sports go to the grinders, high-volume DFS owners who use advanced analytics and software to enter many contests at once. Grinders make up roughly 1% of the DFS gaming community, but they win the lion’s share of winnings. It is the equivalent of a poker professional playing a large collection of fish in the card playing industry.
Daniel Wallach on DFS Fairness
Daniel Wallach is a sports and gaming lawyer who is quoted in major publications and called for government hearings on the DFS industry. In fact, Mr. Wallach was called to a government panel in Massachusetts recently to discuss Maura Healey’s proposals and the DFS industry in general.
Daniel Wallach says Healey’s proposals are an issue of fairness. He said, “The biggest consumer-protection issue in DFS is the loss rate. Ninety-one percent of winnings go to close to 1 percent of the players, and over 70 percent of the players overall are reporting net losses. Is that just simply a matter of small percentage of players being so highly skilled that they’re crushing the field, or is in some measure, related to the number of entries and the ability to mass-enter contests and make automated last-minute lineup changes?”
What Is Bumhunting?
In poker, the practice is called “bumhunting“. Using analytics software and computer scripts, the highly skilled card player searches for below-average poker players to play. This allows a card player to win a significant amount of time, because their level of competition is not good.
Most of the big time, legitimate online poker rules banned the scripts in the past few years. As a consumer protection issue, they want to keep competition organic. The poker sites see it as a fairness issue.
Jay Caspian King on Bumhunting
Jay Caspian King wrote on the New York Times Online Edition that DraftKings and FanDuel went in the opposite direction. Instead of taking measures to protect the vast number of DFS competitors, the companies took steps to protect their high-volume customers, as well.
In a NY Times Blog post titled “How the Daily Fantasy Sports Industry Turns Fans into Suckers“, Jay Caspian King wrote, “rapacious ecosystem in which high-volume gamblers, often aided by computer scripts and optimization software that allow players to submit hundreds or even thousands of lineups at a time”.
The writer suggested that the more systematic, automated players “repeatedly take advantage of new players”. In poker, said Mr. King, the community calls the practice “bumhunting”.
Game of Skill or Game of Chance?
The reason DraftKings and FanDuel favors the grinders over the mass market players is uncertain. Certainly, they get a high volume of play off those players and would want to keep them playing. Also, they can cite the statistics that show a high win rate for certain professionals, thus maintaining the stance that daily fantasy sports is a “game of skill” and not a “game of chance”.
At the same time, constant defeat by the same opponent drives away customers. Many DFS competitors jumped on DraftKings and FanDuel in 2014 and 2015, but are gone from those sites in 2017. The scandals, litigation, and uncertainty plays a role in their departure. But more than that, the creeping feeling they have no chance drove away many.
People play fantasy sports to feel like a general manager of a franchise in their favorite sport. They want to feel like they’re smart enough at their sport to predict outcomes. If they lose all the time, that kills the fantasy and they stop playing.
If the Massachusetts regulations are passed, then it might restore faith in the mass market players they have a chance to win. Draftkings/FanDuel would have to convince players to return and give their games a try. That would not be easy, because these are essentially burned customers.
Still, the companies do not want to have to try a different business approach, but instead want to lobby the Massachusetts state government to avoid such regulations. An even bigger concern to them is a rule that would limit losses on a DFS site to $1000-per-day. While that is seen as a consumer protection clause by Maura Healey and her office, the DFS companies see it as a threat to their bottom line.
