DFS Data Leak Means Increased Demands for Regulation

Last week’s leak of key statistical information regarding players-drafted percentages from daily fantasy sports market (DFS) co-leader DraftKings is likely to have a huge and immediate impact upon the startup sports-betting offshoot industry’s immediate future.  As a direct result of recent revelations, a surge in consumer mistrust and the question of whether major contests are being gamed by company insiders — whether on their own or on competing sites — is likely to translate to immediate, increased pressure for governments to rein in and regulate the industry.

It’s going to be an uncomfortable next few weeks for major DFS sites, at the very least.  Already facing heightened security brought about in part by major sites’ own massive advertising blitzes, the industry was rocked by the leaking of DraftKings’ “Millionaire Maker” NFL Week 3 player-drafted percentages some time before that Sunday’s second wave of games (the 3:25pm ET wave) was slated to begin.

Worse, the information was posted by Draft Kings written content manager Ethan Haskell, who in the very same week, made a huge score by finishing in second place in FanDuel’s biggest weekly NFL tourney, to the tune of $350,000.  As a DraftKings employee, Haskell isn’t eligible to play in DK’s own tourneys, but it appears to be an industry standard that employees of major DFS sites are prolific bettors and spenders on rival sites.  And they may — emphasis on “may” — be doing it, and profiting handsomely in the process, with privileged, insider information.

Whether or not Haskell himself used that information to draft his winning FanDuel lineup cannot be stated with certainty, and we at FlushDraw make no such accusation.  What cannot be disputed, however, is that according to the DFSReport story which first built off the advance publication of DraftKings stats were supposed to have been locked, Haskell’s winning FanDuel lineup was built virtually exclusively of players who were underdrafted relative to their expected value on DraftKings.

It’s not a 100% correlation to saying the same batch of players was underdrafted on FanDuel as well, but that would be the obvious betting line.  The two sites, and all DFS sites in general, use slightly different scoring systems.  Nonetheless, if receivers Randall Cobb and AJ Green are undervalued on one site, they’re very likely to be undervalued on others as well.

That’s why the disclosure that at least one DraftKings employee or executive (meaning Haskell, in this instance, had access to this sort of statistical breakdown is a huge, huge deal.  As poker-strategy wonk Ed Miller (Hi, Ed!) put it in a piece that appeared at OPS offshoot LegalSportsReport yesterday, ““If you knew beforehand which players would be most used, in the major sports you can build +EV (positive expected value) cash game and GPP lineups based almost solely on that knowledge.”

Success in DFS isn’t only about picking players who will put up big stats; it’s also about picking the players who are putting up those big stats that other bettors have overlooked, lest one’s big-stats day get lost in a giant pack of similarly-drafted lineups.

Ed is 100% correct, but that correctness still understates the actual situation.  Indeed, there are third-party DFS companies that specialize in analyzing the stated purchase prices of all players listed on sites such as FanDuel and DraftKings for a slate of games that’s soon to be played, selling that info to subscribers.  It’s folly to think that sites such as FD and DK aren’t aware of these offerings, and armed with their own information about who’s drafting players in what percentages, aren’t already programming their own internal algorithms to derive “optimal” EV lineups in the hours or minutes preceding a day’s kickoff, just before lineup submission is closed.

Such things are utterly unregulated at the present time.  Don’t expect it to stay that way for long, as it absolutely is a form of insider trading.

Whether or not Haskell, the written content manager at DK, used such information in building his winning FanDuel lineup remains uncertain.  In a comment added to the DFSReport story added by RotoGrinders founder Cal Spears, Spears claimed that Haskell didn’t have access to the data in time to submit his winning lineup on FanDuel.

Wrote Spears, “…I agree with you that there are some legit industry concerns with site employees being able to play on other sites. From what I’m told those concerns were not manifested in this scenario. Ethan told me he received this data in a report after lineups locked so that he could write the Milly Maker percent owned piece for DK Playbook. He can’t access the database himself – he has to put in a request for a query. At that point its too late to use this information on Fanduel. If he had his score on a site that offered late swap I could see more merit to a controversy here, but Fanduel had already locked.”

Source: DFSReport.com

Maybe yes, maybe no,  Maybe that request wasn’t the first one made that week by Haskell for that or other, similar information.  What is now publicly known is that lineup Haskell played was built almost exclusively of underdrafted players on DK, and likely also as well at FD.  In fact, the majority of the players appeared to be be even more underdrafted at FanDuel (image at right), with the caveat that the scoring-system differences might or might not account for some of that.

It’s also important to note that despite previous assertions that these ownership stats are publicly locked until the games are underway, there’s been absolutely no such declaration from DraftKings that such stats aren’t privately available to the site’s upper employees or owners, and haven’t been used for exactly that purpose (building optimal lineups for use on competing sites) all along.

It’s a sad truth of all these things: If a money-wagering system or industry can be gamed, then it’s a safe bet that somebody is already in the process of doing that gaming.

It won’t stay that way for long.  Big money brings official scrutiny, sooner rather than later.  DFS sites are already in the scope of several US states, and the latest revelations are likely to add several more to the list, as well as increase support for a recent call by US Rep. Frank Pallone to examine the DFS industry.

If I were a betting person, and I am, I’d wager that DFS’s “Wild West” days are coming to a screeching.  Stay tuned: The public snarling over DFS is going to become much larger as 2015 draws to a close.