Daily Fantasy Sports
I’ve been thinking a lot about Daily Fantasy Sports sites today. Sites like Fan Duel or Draft Kings. Basically, it’s like fantasy baseball or fantasy football, but on a daily basis. Ultimately you can join pools or play head to head, and you pick a group of players for a salary cap, and then get points based on how they do. The lineups with the most points win the prize.
What the sites themselves are doing is nothing new. However, it is interesting in the sense that they are allowed to do it online. Despite it’s similar appearance to gambling, a 2006 piece of legislation allows for fantasy sports betting. All these companies need to do is build a platform, and then attract people to play on it. From there, the business model is clean. Similar to online poker, they just take a rake of all the money wagered. Different from online poker — it is legal.
The intriguing thing regarding these fantasy sports sites revolves around baseball. Baseball is an interesting game because although it is a team game, the outcome is entirely dependent on individual contributions. Whereas a basketball player or football player can play a big role in a game without ever touching the ball, in baseball, a player gets a chance to hit, field, and/or pitch. Because of the straightforwardness of baseball, there has been a huge influx of statistics and sabermetrics in to the game. There was even a book published in the last few years by Joe Peta. Joe was a Wall Street quant who broke his leg during the financial crisis while at the same time losing his job. While being holed up in his small apartment with a broken leg, Joe turned his attention to baseball. Using his quantitative background, he began to analyze the Las Vegas odds to see if they were being set according to the true values. He realized they were not.
This market inefficiency makes sense. Although the betting lines that Vegas was setting did not correspond to the true odds according to statistics, Vegas was not losing money. The sports books in Vegas have the goal of attracting equal money on either side of the bet, and then making their money off the vig. Long story short, Joe took advantage of these market inefficiencies, made a little money and then wrote a book. From here he has been pretty tight lipped regarding his performance or the current market saturation of people using his strategies.
And yet, I can’t help but think that there is an opportunity to do the same thing within FanDuel or Draft Kings, or some other daily fantasy site. First, you would need to determine how these sites are devising the player projections, and if these projections were the best system. You would also need to analyze how their projections relate to scoring and player salaries. From here, you would need to determine if their was an optimal way to set a lineup, as well as scoring breakdowns, and then manage your team accordingly. From here, you could potentially play many different contests on the FanDuel sites each day, with the goal of making a little bit of money each day.
Is this possible? Could you game these daily fantasy sites? I don’t see why not — if Joe Peta can game Vegas, then why can’t people game these fantasy sites? Especially these days. A user could potentially write a script that pulls player salaries, projections, actual results, etc., and bring it all in to a data warehouse and then analyze it. From there, they would just need to either A) exploit the loopholes within the player salary rankings or scoring projections
B) Determine the common traits of winning teams or players that are not valued correctly
I would love to see someone do this, and I would love to be a part of it.