DraftKings

The Sports Betting National Championship (SBNC) and DraftKings’ King-Sized Foul-Up

Among the interesting tales from recent days that a potent virus kept this writer from visiting was the ridiculous conclusion to the National Sports Betting National Championship (SBNC), a concept event floated by DraftKings in New Jersey that attempted to merge aspects of traditional sports betting and daily fantasy sports-styled competition into something new and potentially rewarding, meaning a $2.5 million prize pool and a $1 million first-place award. Yet the SBNC concept termed out to be so poorly executed, resulting in the virtual immediate filing of a class-action lawsuit by one of its contestants, that it’s likely to be a long time before a second SBNC or a similar competition sees the light of day.

By the time it’s all over, DraftKings is likely to have taken a multi-million-dollar hit to its bottom line, a wholly self-inflicted wound from trying to pull off a concept and competition that DK’s infrastructure, by all available evidence, wasn’t even close to being sufficient to take on. “What were they thinking?” is likely to be the first question most people ask about this fiasco, some time down the road.

Draftkings LogoLet’s reprise the basics: DraftKings served up the SBNC and its $10,000 buy-in for a three-day wagering competition that ran January 11-13, 2019. $5,000 of the $10,000 buy-in served as a special contest bankroll for wagering purposes, while the other $5,000 went to the prize pool, less some administrative fees. DK earned more money, over a third of a million, by charging standard juice on all wagers made within the contest.

The top prizes were awarded to the contestants who managed to make the most profit off that $5,000 roll during the the three days of the competition. (If the guaranteed prize pool and the $10K buy-in and the paying of just a few percent of participants sounds all poker-ish, well, that’s always been DraftKings’ bread and butter approach; the company’s founders and executives include several people with extensive poker backgrounds.)

192 bettors entered the SBNC. When the contest concluded on January 13th, a New Jersey poker dealer, Randy Lee, had earned the greatest profit over the three days, thus earning the million-dollar winner’ prize. And then the shit hit the fan, when widespread tales of an unbalanced playing field emerged, in terms of both wagers being settled (“graded” in industry terms) and being accepted or denied in the first place.

As the contest wound down on Jan 13th, some contestants (including the winner, Lee) found their previous wagers settled almost immediately, allowing them the chance to wager their entire bankroll on the NFL’s last game that day, featuring the Philadelphia Eagles and the New Orleans Saints, while other contestants had wagers that remained ungraded, preventing them from re-wagering their contest winnings in the hope of climbing higher on the leaderboard.

Given this inequitable farce, it was all but preordained that DraftKings would be sued, and that happened just four days later, when SBNC participant and well-known poker pro Christopher Leong was named as the lead plaintiff in a class action Resorts Digital Gaming, LLC, the New Jersey parent of DraftKings. The 22-page complaint was filed on behalf of Leong by attorneys William Pillsbury and Maurice “Mac’ Verstandig, the latter of whom has represented numerous gambling-world plaintiffs in recent years.

The complaint asserts that at least five other potential class-action plaintiffs are waiting in the wings should Leong be found unsuitable for the purpose of having the class action certified, though that seems unlikely; this case has all the earmarks of a slam dunk… and DraftKings seeking to find a way to settle its way out of this mess. And the six likely participants don’t even include SBNC third-place finisher Rufus Peabody, who was leading the contest mid-day on the 13th but was among those who found himself locked out of late wagering chances and kept him from attempting to defend his lead.

The SNBC’s contest rules attempted to create a level wagering field, but this is where the whole thing failed miserably. As alleged, not only did DraftKings settle completed wagers on an arbitrary, capricious, and often untimely basis, the company also rejected some wagers — particularly prop-style wagers — that were nonetheless publicly offered on DraftKings’ boards and were allowable wagers within the confines of the SNBC.

These are huge, systemic problems. Many types of wagers require second-level review within a sportsbook, and yet the SNBC’s framework seemingly had no special structure for reviewing these wagers on a uniform and timely basis. Here’s an example, one of several from the complaint:

By way of further anecdote, at 4:29 pm on January 11, one SBNC contestant attempted to place a One Thousand One Hundred Six Dollars and Seventy Eight Cents ($1,106.78) wager on the total number of rebounds by a single player in the NBA contest between the Indiana Pacers and the New York Knicks – again, the personification of the “major sports” for which Mr. [Jon] Aguiar had assured limits “shouldn’t really come into play” – only to have the wager rejected even though the wager was available in the DraftKings sportsbook.

Stunningly, however, the same bettor placed another wager, also at 4:29 pm on January 11, on the same NBA contest between the Indiana Pacers and the New York Knicks, also on the number of rebounds by an individual player, in the amount of One Thousand Three Hundred Ninety Three Dollars and Twenty Two Cents ($1,393.22) – an even greater sum than the rejected wager referenced in the foregoing paragraph – and had it accepted.

The only logical reason for the above is that the wagers were subject to individual, second-level, and very subjective review. So much for the pretense of a level playing field. Given that no thought appears to have been given within DraftKings to flag all SNBC players so that their contest wagers weren’t waylaid by these industry-standard second-tier wager reviews, again, what the hell was DraftKings thinking? How do you put together a multi-million-dollar contest and not realize the contest’s particular demands are at cross purposes with your standard operating practices.

And when it came to having completed wagers settled in a timely manner to allow rewagering, oh, hell no. More excerpt:

[T]he amount of time it took for wagers to be accepted or rejected varied appreciably, with SBNC participants not having access to wagered funds while this subjective and seemingly random decision making process was undertaken.

Pragmatically, this meant one entrant in the SBNC could wager funds, have the bet rejected, and be able to place a new bet with the same money, in a matter of seconds, while another entrant in the SBNC could wager funds, wait close to ten minutes (an eternity in the fast-moving world of sports betting, where betting lines can change on a moment’s notice), and only then discover a wager has been rejected.

Even more brazenly, upon information and belief, the Defendant did not always use automatic grading for wagers in the SBNC but, rather, allowed individual bettors present at the event’s headquarters in Jersey City, New Jersey to personally approach persons at a help desk, after the conclusion of an event on which such bettors had wagered, and have the wagers graded manually so funds would become available for the bettors to use in subsequent contests.

By way of anecdote, at one point a wager made by Mr. Leong, as part of the SBNC, proved successful at the conclusion of an NFL football game, yet was not graded automatically or immediately, with Mr. Leong waiting more than two hours for the winning funds to become available for further wagering in his SBNC account and, even then, only having the monies credited when he hired a rideshare driver to take him to the SBNC headquarters in Jersey City, personally approached the help desk set up by the Defendant, and pleaded with an individual to have his wager graded, which then occurred within a matter of minutes. 

Oh, hell no… times 1,000.

Did DraftKings somehow not comprehend that this individual settling of wagers was wholly inadequate for this type of contest? And assuming that the above or any of a large number of contest-entrant anecdotes are true, did they not realize that this is also going to raise the whole “special customers” (a/k/a friends of DK insiders) specter of improper business management and practices? Did DraftKings somehow forget part of what got them in trouble with the New York Attorney General’s office, the whole playing-under-the-radar thing by DraftKings and FanDuel employees on each other’s sites, and what that all implied about the behind-the-scenes sharing of information and granting of special privileges?

And that’s without even getting into the whole issue of, again, not having a proper software solution installed and enabled for the special purposes and needs of this new concept, the SNBC.

Is there anybody in a decision-making role at DraftKings who has a fucking brain? Just because something seems like a good idea doesn’t mean it really is. This SBNC should have been deep-sixed at several different steps in the development process. But because it wasn’t, it’s likely that DraftKings will have to learn another expensive lesson. Sooner or later, someone there will have to learn to think about “why”, but also about “why not”.

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