Scandal in Daily Fantasy Sports
A few months ago, a scandal broke involving two daily fantasy football websites, DraftKings and FanDuel, and an employee who won $350,000. Daily or weekly fantasy sports leagues charge a small fee to enter and advertise large pools where players can compete against dozens of opponents and win up to millions of dollars. These websites operate through a loophole in the law which specifically allows fantasy sports leagues even though they are essentially gambling games.
Many allege that the employee from DraftKings used inside information to gain a significant edge in the competition which would have been illegal in a more heavily-regulated market. This employee had access to information about which players were drafted the most by all entrants to that week’s contest. In essence, he was able to use the wisdom of the crowds to gain unequal knowledge about the utility of each player. While it is not clear for sure if this information led him to win second place in the FanDuel competition, it would have almost surely increased his odds the wisdom of the crowds instead of betting his own predictions.
This situation also has connections to voting theory in that essentially, entrants to these fantasy leagues are ranking players according to their beliefs about each player’s worth. The key though, is that there is no incentive for any entrant to manipulate the voting since there is no advantage to be gained from changing the majority opinion since that is usually only released after the lineups are finalized. Therefore, this data is close to the true majority opinion which makes it very valuable data.
The revelation of this scandal prompted a deeper look by many in the media and the public into how unregulated the daily fantasy sports market is. There are relatively few limitations to using inside knowledge about, say, injuries that have not yet been made public. The market is very similar to simple gambling schemes with betting and odds and it should be regulated as such to protect the users.
Source: http://www.nytimes.com/2015/10/06/sports/fanduel-draftkings-fantasy-employees-bet-rivals.html?_r=0