DraftKings To Bail Out Stranded FantasyHub Cutomers

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Tuesday, March 15th, 2016 | Written by Shane Larson

Daily fantasy sports betting has gotten a serious black eye over the last year. First, the story broke that employees at top sites were engaging in what was essentially insider trading by using their knowledge of how the algorithms of sites worked to make money at competitor sites. Next, a number of states came out against the DFS industry, labeling it as ‘gambling’, including Nevada, and New York, whose attorney general has put DFS betting sites squarely in the cross hairs.

The collapse of FantasyHub then threatened to worsen the public perception of daily fantasy sports betting, but this week DraftKings made a surprise announcement that it intends to ensure all the site’s stricken customers are reunited with their lost funds, even though DraftKings is not connected with FantasyHub, nor has any intentions to acquire the company.

What Happened to FantasyHub?

FantasyHub shut down on February 19th, and has not returned any player money following the closure. The company won’t even provide information to players regarding where their money is or when they may expect to receive it back. This is naturally shocking to players, as they were led to believe that their funds would be kept in a separate account, protected in case the company closed due to financial problems.

While it’s not clear if the money in player reserves was spent, many industry insiders speculate that the company dipped into the funds to try to stay afloat when investors backed out following the run of bad press that daily fantasy sports betting received last year. A unique selling point of FantasyHub was that it enabled players to donate some of their winnings to charity. However, there are now also questions as to whether or not FantasyHub ever made donations to charities with player funds as was promised in the Terms of Services. So far there has been no proof that any such contributions were made.

As a result, thousands of FantasyHub customers are currently owed several hundred thousands dollars by the company, as well as a further $100,000 owed to charitable causes.

FSTA Measures Give an Inadequate Response

The Fantasy Sports Trade Association (FSTA), a lobbyist group, has long vowed that their top concern is ensuring fairness for players, so one would expect the group to put measures in place that would prevent something like FantasyHub ever happening again. Unfortunately, that’s not what we’re seeing in states across the country.

Bills that the FTSA is currently advocating to state lawmakers propose one of two potential solutions. Some bills like one in Missouri seek to label daily fantasy sports betting as a non-gambling activity that would make them exempt from regulation entirely. Others, like one in Alabama, make daily fantasy sports betting exempt from gambling laws but put them under regulation by a third-party agency that the site operators in the state would choose.

Regulation The Way Forward

Obviously, a situation where there is no regulation of daily fantasy sports betting at all would do nothing to prevent a scandal like the FantasyHub closure from happening again, but even third-party regulation is unlikely to do much to protect players. After all, without a government agency able to enforce laws and dole out punishments, there is a risk that third-party agencies will let things slide in order to remain the provider of choice for operators.

Clearly, more needs to be done to protect players who want to place daily fantasy bets. As a result, many states are currently seeking to regulate the industry, and commenting on the issue, US entrepreneur Mark Cuban said:

“That’s why at least 20 state legislatures have taken up or are expected to take up fantasy sports legislation this year. Bills are already moving through legislatures in California, Indiana, Virginia and Florida that will clarify the laws and regulate fantasy sports.”

DraftKings to the Rescue

Against this backdrop, DraftKings has come to the rescue of thousands of DFS players left high and dry by FantasyHub. DraftKings is keen to present the DFS industry in the best possible light, especially considering the court case brought against it by the New York State Attorney General’s Office. Offering to help out this group of players obviously presented an opportunity for the company to turn a bad situation around, and at the same time acquire a whole host of new customers.

After all, FantasyHub customers will be required to contact the company, or open a DraftKings accounts in order to receive their funds. Elaborating further on the matter, DraftKings co-founder Matt Kalish explained:

“We never want to see our player base got through an experience that’s negative like this. What happened here was reprehensible. It is a breach of trust for these players and we share a lot of these players with them. We just didn’t think it was the right thing to do to sit on the sideline and let that happen. We had the ability to step up and do something.”