Public's biggest issues with the DFS industry

There has been plenty of public outrage toward daily fantasy sports. What is the origin? Mike Granse/USA TODAY Sports

For decades, the public was fine with fantasy sports. The biggest negative stereotype was that the game was played by nerdy stat geeks. When daily fantasy sports (DFS) was born, however, that perception changed.

Some folks will tell you the daily version of fantasy sports is infested with devious, high-tech sharks and even -- gulp -- hardened criminals.

In the early years of DFS, the haters mostly came from inside the burgeoning industry. Struggling players, looking for reasons why they were losing money, lobbed pot shots at successful players who had gained notoriety -- the faces of DFS. It amounted to infrequent, mild complaining on social media and online forums.

But that all changed after Week 3 of the 2015 NFL season.

On Oct. 5, a few hours before the Detroit Lions took on the Seattle Seahawks on Monday Night Football, the New York Times posted a story about Ethan Haskell, a young employee at daily fantasy operator DraftKings who had won $350,000 playing in an NFL contest on rival site FanDuel. There were allegations that he had used inside information.

All of a sudden, the tone of the DFS hatred went from whining to, in some cases, irrational venom. Many commenters told Haskell to "die" on social media.

"Basically, it had always been a thing that the 'faces of DFS' had to deal with," said one prominent daily fantasy player, who asked for anonymity to avoid further backlash. "But after the story went national, it took on a whole different form."

Politicians and lawmakers have taken aim at the DFS industry, firing haymakers, some more accurate than others. New York Attorney General Eric Schneiderman accused the leading operators, DraftKings and FanDuel, of "fleecing" sports fans. The sites and the Fantasy Sports Trade Association fired back with accusations of grandstanding. Even prominent attorney David Boies, who represents DraftKings and is a veteran of the back-and-forth discourse that takes place in high-profile cases, said he has been "stunned" by the level of rhetoric in ongoing cases about fantasy sports.

Washington state Rep. Christopher Hurst recently said the CEOs of DraftKings and FanDuel are "no different than [drug lord] El Chapo in Mexico advertising heroin or the methamphetamine on our airwaves a thousand times a day to get kids to try it."


Where did the DFS hate come from, and how did the vitriol directed at the industry become so extreme? Over the past month, Chalk asked more than 20 sources inside and outside the industry. The three most common answers, in order: (1) the advertising, (2) the industry's "not gambling" stance and (3) the media coverage.

The advertising

In June 2015, longtime gambling industry executive Gene Johnson was at dinner with a CEO of a major daily fantasy sports operator, during which they discussed the CEO's plan for a massive DFS advertising blitz leading up to the football season. The CEO explained that, with their financing already in place, the marketing push was simply the next step of the business plan. Plus, their biggest competitor was preparing a similar approach; an advertising arms race was about to begin.

Johnson looked at the young CEO and said, "Do you think that's a good idea?"

On Aug. 31, the peak of the DFS marketing blitz, DraftKings and FanDuel combined to air almost as many ads (1,285) as there are minutes in the day, according to iSpot.tv, which tracks advertising data. For three straight weeks in late August to early September, the two rival industry leaders had an ad on national TV every 90 seconds. Daily fantasy sports, a newer fantasy game that looks a lot like gambling to the general public, had become the most advertised product on TV.

(According to a recent report, ESPN's exclusive advertising deal with DFS operator DraftKings has ended. ESPN had no further comment.)

"Casino gaming has learned over the years to try and keep a low profile," said Johnson, a senior vice president for Spectrum Gaming Group. "The DFS ad blitz put it in the public's face and provoked a negative backlash. [It wasn't] the wisest strategy, in retrospect."

The relentless frequency of the ads was only part of the problem. Described as "frat-boyish," "aggravating," "misleading" and "just plain dumb," by marketing experts as well as industry proponents at recent conferences in Florida and Texas, the quality of the content has also been an issue.

"They were trying very hard to sell, sell, sell," said Jason Stein, founder and CEO of marketing agency Laundry Service. "And in the world we live in today, that's not what people really want. They want a transparent relationship, understanding who they are and what they believe in. By focusing so much on the transaction, it didn't add much value to users."

Added Johnson: "It created a negative attitude among casual sports fans and even some serious sports fans, because of the overload -- DFS fatigue, if you will. And that fatigue, because of the negative connotations of the advertising, it became ... the 'DFS hate.'"

But if the advertising was the gasoline, the match was the Haskell incident.

In the fall, Haskell -- a DraftKings employee who declined to be interviewed for this story -- inadvertently published information revealing what percentage of lineups included which players before the late afternoon slate of games had kicked off on the Sunday of his big win. It was a mistake akin to accidentally hitting "reply all" to the wrong office email, but was largely portrayed in the media as nefarious insider trading. Even though similar ownership data was available on other sites -- and the value of that information is viewed as minimal by some high-level players -- it was described as a "distinct edge" in some reports. True or not, the pitchforks were unveiled.

Weeks later, a third-party law firm commissioned by DraftKings released an investigation that found Haskell did not have the ownership data before his winning lineup was finalized and locked on FanDuel. It didn't matter. In the court of public opinion, he was a villain.

The ad blitz lasted through October. When it was over, DraftKings' and FanDuel's customer bases had grown significantly. But the industry leaders also found themselves under investigation by the New York Attorney General's office and a grand jury in Florida. "The attorney general as well as the grand jury in Florida were about deceitful advertising," Richard Roberts, CEO of DraftDay Gaming Group, said.

America has put up with aggressive advertising blitzes before, though, and claiming some advertising is more misleading than others can be a tough distinction to make. All ads emphasize a product's strengths and downplay its weaknesses. Yet by the end of the DFS marketing blitz in late October, the backlash was intense. Why?

"I've personally never seen the volume of advertising like that; so fast, so much, so quickly," Stein said. "And I think the quality of the content had a huge impact on the [reaction]."

Not gambling

It was an awkward moment in mid-February at the Fantasy Sports Trade Association winter conference in Dallas. Even the two professors presenting on stage knew it.

Dr. Brody Ruihley of the University of Cincinnati and Dr. Andrew Billings of the University of Alabama were sharing the results from a survey of around 500 people associated with the FSTA. Ruihley paced the stage and read off quotes from survey responders regarding daily fantasy.

"[I] enjoy the daily nature of the game, like being a general manager every day," Ruihley read.

The awkwardness came next.

"I don't like the fact that it isn't classified as gambling. It is," he recited. "They need to stop that."

Seventy percent of responders to Ruihley and Billings' survey said that when money is involved, fantasy sports are a form of gambling. Attorneys General in Hawaii, Illinois, Massachusetts, Mississippi, New York, Nevada and Vermont also have said DFS is a form of gambling. Problem gambling experts say DFS possesses the characteristics shown to cause the compulsive behaviors associated with gambling addiction. Opponents of gambling expansion also view DFS as a form of gambling, as do veteran gambling officials.

"I'm all for daily fantasy sports betting, just like I'm for other forms of sports betting," said Joe Asher, CEO of William Hill's Nevada sportsbook. "I think they should be legal and regulated. But let's be real -- [it] is gambling and it should be regulated as such."

Among those who have publicly said DFS is not a form of gambling: The sites that offer daily fantasy, the Fantasy Sports Trade Association and their investors, including Major League Baseball commissioner Rob Manfred and Dallas Mavericks owner Mark Cuban. They also have some legal distinctions on their side; most notably, rulings that have concluded that entry fees into games of skill are not considered a bet or wager.

In a February "Frontline" report by PBS and The New York Times, a professional daily fantasy player said he was contacted by a representative of FanDuel, who requested he not associate their brand with "gambling." Over the summer, DraftKings made a similar request to comedian Bill Burr, asking him not to say it is a gambling website when reading promotional material.

Yet while DraftKings has been trying to distance itself from gambling, it has also advertised at poker tournaments and horse races such as the Belmont Stakes, and according to Nevada Gaming Control chairman A.G. Burnett, its website's metadata was stuffed with gambling keywords. Both DraftKings and FanDuel have also applied for gambling licenses in the United Kingdom, where the laws classify daily fantasy sports as gambling. DraftKings has been granted its gambling license and recently launched operations in the U.K., while FanDuel's license request is still pending.

Legal counsel for the sites argue that whether or not DFS is gambling is not the true issue, and it may not be the deciding factor in the courtroom. But in the court of public opinion, each time a fantasy proponent goes out of the way to emphasize "we're not gambling," the general public believes it's being misled.

"The sites, presumably for legal reasons, have had to posture as not being gambling," said Colin Drew, a 30-year-old avid DFS player and writer from Washington, D.C., who was the author of the original post in this fan forum discussing the Haskell controversy. "I'm an advocate for all skill-based gaming (poker, DFS, sports betting), but think it rubs many the wrong way that the sites pretend that it is truly unique compared to those other games. I think anyone who plays DFS with any regularity believes it is skill-based gambling that should be legal."

Fantasy sports proponents don't even want to be associated with traditional sports betting, a form of gambling that even the NFL and Department of Justice have said is also skill-based. Even so, the Fantasy Sports Trade Association is lobbying to get a clear distinction between fantasy sports and traditional sports betting. But is there one?

Daily fantasy sports proponents, including high-level executives like FanDuel CFO Matt King, have said they offer an entertainment product that's based on skill. During a recent phone interview, another daily fantasy executive attempted to explain the distinction they make between daily fantasy sports and traditional sports betting: "I view that [DFS] is a game of skill that's around an entertainment product, where you have to understand, in-depth, the players across the board. You have to understand what the weather conditions are; who that player is up against. You have to understand injury reports."

Sound familiar? Ask any high-level sport bettor their process in picking which teams to bet, and they'll tell you, in some form, that they examine players, weather conditions, matchups and injury reports. Certainly, there are nuances between how fantasy sports and traditional sports betting are played, but the core skill is exactly the same: You are attempting to predict the performance of athletes.

As long as daily fantasy operators continue to attempt to talk around that reality, they'll be facing an uphill battle against the public.

Asked in the "Frontline" interview whether his company offers gambling, King simply said, "No."

The media coverage

The original headline on The New York Times' report of the Haskell incident -- as well as reports from other media outlets -- included the term "insider trading." It wasn't up on the Times' website for long -- a few hours max -- before it was changed. But the damage had been done. The story in early October went viral -- rapidly.

It's challenging for any member of the media to cover a story about an unfamiliar subject, and much of the mainstream media scrambled to learn about DFS on the fly while covering a story that rose to national relevance overnight. Inevitably, some mistakes were made, which often painted the daily fantasy industry in a negative light.

"This is an easy industry to sensationalize," said Adam Krejcik, managing director at Eilers Research, a consulting firm that works closely with the gaming sector. "There's the perception that [DFS] is this huge, huge Ponzi scheme ... it's 'Oh my God, this is a billion-dollar underground industry, with problem gamblers everywhere.' That's really, to me, that's sensationalism and truly not getting all the facts correct."

The New York Times did a yearlong investigation into illegal sports betting in the U.S. The investigation was very thorough and featured a visit to an online sports betting book in Curacao. It also included DFS in the investigation.

"Even if you believe, as we don't, that DFS is gambling," Fantasy Sports Trade Association chairman Peter Schoenke said, "it's a whole other level to equate us [with] an offshore sportsbook or the underground bookie on the street. There [are] definitely some issues here, definitely some difference of opinion, and that's all fair, but I felt like that one kind of crossed the line."

The FSTA said it has been disappointed by the media coverage overall, claiming that corrections have not always been made upon request. Daily fantasy operators say they've been frustrated by outlets refusing to run statements the companies provided. One daily fantasy public relations executive said a reporter, when pushed for a correction, actually suggested that they should contact the attorney general's office.

On the same day the controversy surrounding Haskell erupted, the Times editorial board penned a piece titled, "Rein In Online Fantasy Sports Gambling." That message has been evident throughout the Times' coverage, which some say has been overly one-sided.

"One thing about the Times' reporting that does make me uncomfortable is the apparent conflation of daily fantasy sports sites and offshore sportsbooks," said Chris Grove, publisher of the influential industry site LegalSportsReport.com, who was also quoted in the "Frontline" feature. "While I do believe DFS and sports betting share quite a bit of DNA ... it's deeply misleading to suggest -- even via topical proximity -- that a U.S.-based daily fantasy sports company is broadly similar to an offshore online sportsbook."

Grove does question the validity of the accusations of unbalanced coverage, however.

"It's easy to complain that the balance of mainstream media coverage of daily fantasy sports has tipped overwhelmingly into the negative," he said. "But that complaint misses the fact that there have been precious few positive developments for daily fantasy sports since October. And most of the developments that could be cited as positives are more mitigations or reversals of negative developments than truly positive developments."

New York Times Pulitzer-Prize winning journalist Walt Bogdanich, one of the primary reporters in the sports betting and DFS investigation, said he approached the story like any other.

"Our approach is we report the news. We haven't been unfair, by the way," Bogdanich wrote in an email to ESPN. "The issues we've raised are being echoed by attorneys general and legislators around the country. Were DFS commercials 'fair' when suggesting over and over that winning big was easy on DFS?"

It's been five months since the DFS ad blitz bombarded the airwaves. The ads were the gasoline, the Haskell controversy the match and the media coverage an added accelerant.

The venom directed at prominent DFS players has tempered, but several pros have been named in class-action suits, including Haskell, who still works at DraftKings and is attempting to move forward, along with the rest of the industry.

DraftKings and FanDuel are trying to survive courtroom battles long enough to allow legislation to be passed, clarifying fantasy sports' legal status, and approximately 20 states have introduced bills. But there's still a long battle ahead -- particularly in the court of public opinion.