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Tip: Avoid DraftKings and FanDuel

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I've been meaning to write sports gambling "contest" sites for some time. Fortunately an article on DraftKings in The Boston Globe kickstarted my attention.

If you don't know what DraftKings and FanDuel are, you should probably remove the large rock you've been living under. Just kidding, I watch a good amount of sports and the commercials are everywhere.

These websites, along with some smaller ones, are known as Daily Fantasy Sports or DFS. People go to the websites, pay a fee, and create a team of players. The entry fee money is pooled and the team with the best performing players is the winner getting the bulk of the money.

That description makes it sound like a lottery right? You put in some money and some event churns out a winner who receives the bulk of it, with a sizable portion siphoned off for the lottery operator. Except that companies can't operate lotteries. State laws vary, but almost all of them frown on that. The states make an exception for a few operations that give the operating back to the state to fund infrastructure.

What's the difference? Law is just a passing interest of mine, but it seems to whether it is a game of luck or a game of skill. Games of luck are "bad." Games of skill are "maybe okay?"

State lotteries are quite clearly games of luck. Anyone trying to claim they know which way the ping-pong balls are going to bounce is simply nuts. However, there is a 2006 federal Unlawful Internet Gaming Enforcement Act that allows for fantasy sports to count as games of skill.

This has always been interesting to me. I don't understand why regulators would draw a line in the sand between luck and skill. It opens up a ton of issues.

There are many, many cases where gambling is a combination of luck and skill. Let's take some casino games for example. Roulette seems to fall under luck. As a (rare) craps player, I'd say there's some skill in making bets that gives the house the least advantage. Many argue that if you can count cards, you can even beat the house at "21." I'd say that counting cards is a skill and thus I could be justified in opening a "21" casino. Of course poker is the most obvious example. The cards you are dealt are luck, but the decisions you make after that are firmly in the skill category.

Gambling on sports, for some reason, is illegal in most states. One could claim that they are games of skill too. In fact, some experts have.

The result is a discussion of what games have substantial luck vs. substantial skill. I don't see how such a discussion is productive. It seems very subjective to attempt to quantify the luck vs. skill in a game that relies on both. Bad luck in poker can doom the most skillful player. Good luck can defeat the most skillful player.

Daily fantasy sports is the same way. I don't think anyone expected Jackie Bradley Jr. to have an offensive breakout game yesterday raising his slugging percentage by a hundred points. That's like picking the Bradley Jr. ping pong ball and having it come up in a lottery.

Logically, I keep coming back to sample size. If I'm playing one poker hand, my best friend is going to be Lady Luck. If I'm playing hundreds or thousands, I better develop some skill.

The problem with huge daily fantasy sports sites is that you are competing against potentially thousands or tens of thousands of people. If one of them picked that Bradley Jr. ping pong ball yesterday, you were at a significant disadvantage. Odds are that a hundred or more of your competitors did. Even if you were a baseball expert, you wouldn't have seen that coming and would have likely lost. Tonight it will be another player playing the role of Bradley Jr. Do you feel lucky is guessing him?

Don't feel bad if don't. Even computers aren't great at predicting March Madness. That brings up the point that even the top experts in college basketball bust their brackets just like a monkey throwing darts.

This is all long-winded way of saying, participating in these sites is not sound personal finance. I'm not sure if many thought it was. However, there are probably a few out there swayed by commercials of people holding million dollar checks. I suggest treating it like going to the casino, set a small budget. When you are out of money, stop and leave.

Fantasy sports can be a lot of fun... I've been in a couple of leagues that have existed for more than 10 years now. These free leagues don't cost money and winning is just for bragging rights. What's wrong with leaving fantasy sports as just that?

Posted on August 10, 2015.

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8 Responses to “Tip: Avoid DraftKings and FanDuel”

  1. Evan says:

    Are you against all forms of gambling? Aren’t you in a fantasy league or two? Is it just because you don’t like the odds? There are different game types within each site (i.e. you don’t have to be against 100s/1000s of different people).

    • Lazy Man says:

      I think I got lost in writing this article. I’m not against gambling. I mentioned that I play craps and I also mentioned fantasy leagues that I’m in (my fantasy league has no money exchanged).

      What I find interesting is the differentiator between game of luck vs. game of skill when clearly seems to be a mix of both. If Daily Fantasy Sports are legal, then legalize any and all gambling and lotteries.

      I looked at bunch of contests on DraftKings and they had hundreds or thousands different people. Maybe some have less? I can’t imagine these are the kinds of contests with the million dollar prizes that they are marketing in advertisements.

      I can just see people getting addicted and buying into the thinking, “I know more than these guys, next time I’ll win.” I fear the result would be a significant loss of money.

  2. Evan says:

    I think I look at daily fantasies (or any fantasy league for that matter) like I do poker which I think we can both agree is more of a skill game then lets say Craps (which is pure gambling).

    If you are going to the bigger of issue of whether all gambling should be legal then my answer is a resounding YES! People can/should be able to make their own decisions (as shitty as they may be)

    • Lazy Man says:

      I agree they (DFS and poker) are more of a game of skill, but I’d have to include sports betting in that. I find the inconsistency odd.

      I’m not sure why there’s a differentiator between game of luck vs. game of skill in the first place.

  3. Abigail says:

    Interesting point. A YouTuber my husband and I watch is huge on the company and has helped run some promotions.

    It sounds like fun — assuming you have any interest in sports, which we don’t — so I don’t worry about it too much.

    In the end, as long as people take it for what it is (and don’t pay in too much), I think it’s harmless.

    But you’re right: skill vs luck seems like a strange delineation.

  4. GaryS says:

    If each player uses the full 50k salary in MLB, the computer has already adjusted the player’s individual worth depending on the past 10 days performance. Therefore it comes down to at least 90% luck. I was first on Saturday in a game of 57 players. I was also last in a group of 20 the same day. I tried to make the best lineup available in both cases. Today, John Ryan Murphy was good for 19 points and Bryce Harper had 3.

  5. Jim Smith says:

    I was in a week one million dollar tourney and the winning lineup scored something like 3 standard deviations above the mean for each position….Also, they list players that aren’t even on an NFL roster….Believe me, some math college sophomore is going to study this and discover there’s some past posting going on here. No one can pick all perfect across all positions. If they can, they were under payed at $1 million.

  6. Dave says:

    I tried it for the 1st time this past weekend. A couple of observations. First, I created an account and invested $10 via Paypal. Then I selected my players via the online site and chose my team within the $60,000 cap. Each player is assigned a $ value based on their fantasy point production value. E.g., Aaron Rodgers would cost $9,200 towards the team cap vs. say an Alex Smith, who might only cost $7,000 (maybe even less after last night’s dismal performance:)

    So each time I selected my team and made some tweaks to fit within the $60k cap, I would hit the “Submit” button. Whenever I had put together a stellar lineup with a solid mix of proven producers with a few ‘budget sleepers’ mixed in I would get a message that that league had filled, but they would save my lineup to enter into other contests. I would then attempt to go enter other contests, but whenever I did I would get a message asking if I was sure I wanted to leave this page. Well I had no choice because the contest was full and there was no option to enter another contest with my lineup.

    I then went back to the lobby and found $2 contests for the Sunday and Monday night games. I entered 3 contests for $2 each. One of my lineups had me winning $10 going into Monday Night’s game. My players on Monday Night included Aaron Rogers, Jamaal Charles, James Jones, Jeremy Maclin and the GB Kicker. All of them had great fantasy production Monday Night in addition to the points scored Sunday night by the likes of Demarius Thomas and the Denver D.

    I was sure I had scored enough to make it into the top 1,000s to at least win something. To my dismay when I logged into the site and checked this morning it showed a big goose egg! Apparently I would have needed to have the top fantasy producer at EVERY position in order to win anything and unbelievably hundreds of thousands of players had done just that:)

    The other thing I noticed was that when I looked at the lineups of other players after the Sunday night game their picks for positions for Monday night’s game were hidden. The message stated “to be revealed Monday night..” or some crap.

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