Gambling, Fantasy Sports, and Las Vegas

I was planning on writing this article before the Daily Fantasy Scandal was revealed. I’ll touch on that as well. I also posted a video on it here.

I recently traveled to Las Vegas for one of the largest casino gaming events on earth, the Global Gaming Expo (G2E). I was invited to do the closing keynote, and the team couldn’t wait to get there! A week before arriving, I was asked by someone in the Las Vegas press “why” someone from eSports was invited to speak at this event… after all, last year they invited Steve Wynn and Sheldon Adelson to speak. I wasn’t sure, at least not until we arrived there and explored the space: it was pretty evident that the casino business is changing.

People aren’t getting any younger

New slot machines designed to cater to younger people fill the floors, yet the casinos are still generally full of older people. We were walking through a casino observing the new slots, and the one that caught my eye was a “Britney Spears” slot machine. It had four sides to it, three of them were empty. I really wanted to see what it was all about, and as I walked to the fourth side, I noticed a gentleman playing the game.

The machine had a built-in seat and large speakers — and on the very large curved display, you could see Britney doing her dance routine. It was a real spectacle: Music was blaring, lights flashing, almost like this was designed to be a “night club” in a gambling machine. Sadly, if this is Vegas’ attempt to bring young people into the casino, it was failing miserably. The guy who was playing it was almost a hundred years old, or so it seemed! He was aimlessly pressing buttons while staring into the distance, just like he’s been a fixture in that building since the dawn of mankind. I’m just not sure if the person who designed this machine envisioned this person as the ideal target customer.

Meanwhile young people were b-lining their way through the casino to go straight to the nightclub…and if you ask anyone in Vegas, the nightclub business is just not a great business anymore. So what are these casino owners going to do?

Skill Based Slots

There was a large amount of G2E’s floorspace dedicated to “skill based slot machines.” Some were better than others, although upon pressing the people behind the scenes, it wasn’t clear what they were trying to do. For example, imagine playing an arcade-style video game like Space Invaders, and when you score a point you get a “free spin.” This hardly seems like a skill, and the games didn’t exactly appeal to any of us real gamers. It’s almost like the industry is relying on people who don’t fully understand video games or millennials and that desperation is an outcome in the new products they are designing.

Fantasy Sports

I’ve been watching FanDuel and DraftKings since they both started. They both offer a very similar Fantasy Sports product. Casinos, for the most part, dislike Fantasy Sports because it’s taking away from their core business. Yet much to their chagrin, Fantasy is the product of Casino protectionism and government lobbying.

Back in the day, the Unlawful Internet Gambling Enforcement Act of 2006 was put in place, mostly driven by big money casino lobbyists and some high powered politicians. Big Casino owners wanted to outlaw online gambling, and ultimately they were successful. They often argue that gambling is safer in a casino vs online because anything can happen on a product that doesn’t necessarily require skill to play. In other words, the casino owners were scared of the internet and their business getting disrupted, so they did everything they could to stop it, like paying politicians to do the work for them.

Smart people did what smart people do, and they found a loophole in the law: games of skill should be legal. Boom! The creation of legal betting on Fantasy Sports was set in place. The 800 pound online gorilla was created, smart people came in, and VC funding followed.

The word “gambling” can be softened by calling it wagering, and perhaps even more softened by calling it betting. Somehow, crafty Americans took the word gambling and in a weird convoluted way called it “fantasy.” Meanwhile, people in the UK and Australia (where betting on sports is just part of the culture and the government regulates it) scratch their heads and say “really?!”

The big winners of this loophole were DraftKings and FanDuel. These two companies have a combined valuation of well over 1 billion dollars. My position on Fantasy is simple: I’m a fan of safe and legal betting on sports. I think it’s the best thing for the industry, it almost guarantees competitive integrity, and it makes the games much more engaging and fun to watch. With that said, being legal is one thing — being regulated is an entirely different level. Fantasy is only legal because of a loophole, and it’s not regulated.

We are being inundated with constant advertising from FanDuel and DraftKings while watching our favorite sports, it’s almost annoying. If regulation was in place, then even advertising would be regulated. My 13 year old son is a huge fan of Fantasy Sports. He and his friends have multiple rosters on ESPN. This was all fun and games until he told me that he was signing up for DraftKings. That’s when I woke up to how bad the lack of regulation actually is. Then this happened, absolute proof that regulation in Fantasy is an absolute necessity.

So I hope Fantasy stays legal, I just think it needs regulation. Shutting it down would be the absolute wrong thing to do. With regulation, a level playing field for all types of sports betting would be created. Advertising would be controlled, licenses would be given out to the best quality operators, fly by night companies would shut down and the government and industry would reap big rewards. Betting on sports should be legal, just like it is across Australia and the UK, and many other places around the world.

I am the CEO of Unikrn, an eSports company based in Seattle. Part of our offering allows our customers to safely and legally bet on the outcome of the largest professional eSports tournaments around the world. We partnered with one of the largest public ally traded wagering companies in the world, Tabcorp. We also have a roster of amazing investors on board. We’re committed to creating a highly safe and regulated wagering platform for eSports. We operate safe and legal real money wagering in markets that we’re licensed — we are not a Fantasy company. Ultimately, we believe that betting on sports should be legalized and this entire industry should be regulated. Bryce Blum, who is an eSports lawyer and works for Unikrn, wrote this great article on why betting on eSports is good for the industry.

Not to politicize this even more, but in the U.S., you can pretty much buy anything. In Washington State, a person can buy an arsenal of loaded guns and bags of marijuana. Yet try to place a $20 bet on the Seahawks to win the Superbowl and it’s illegal. It all just seems laughable to me.

I’m going to end with this amazing comment I read in the New York Times article, it says it all.

“Executives at DraftKings & FanDuel say that their games are contests of skill, not luck, which is how fantasy sports are not subject to gambling laws.

But consider: the outcome of these contests relies on the performance of real players in real games who are not in the fantasy world. If I pick Aaron Rodgers, for instance, and he has a four TD day or a four-pick day, I had zero influence. Nothing I do could possibly affect his game-day performance for good or ill.

Ah, say fantasy defenders: Aaron Rodgers is the easy pick; you win or lose based on the sleepers. And yet, the sleeper picks are themselves not chosen by true expertise. Many of the “sharks” in this article use sophisticated computer algorithms to select low-percentage players for them. If there’s “skill” there, it’s computer programming.

By contrast, if I’m an expert poker player, I have far more control over what happens in that game. There is the random luck of the card draw, but my strategy and how well I’m able to bluff my fellow players is entirely down to my abilities versus theirs.

And yet, which is considered by law a game of chance?”

Written by

ceo @unikrnco esports | founded voodoo acquired by hp | created microsoft ventures | advisor & investor in razer, vrvana, maingear | @seahawks diehard 12

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