Matt Bodie has details on the nascent Fantasy Sports Control Agency, a proposed self-regulatory organization for daily fantasy football. If they need a board member with considerable knowledge of business organizations, securities regulation, and fantasy football, may I suggest .. well, me?
A major scandal is erupting in the multibillion-dollar industry of fantasy sports, the online and unregulated business in which players assemble their fantasy teams with real athletes. On Monday, the two major fantasy companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading, that employees were placing bets using information not available to the public.
Last week, an employee at DraftKings, one of the two major companies, admitted to inadvertently releasing data before the start of the third week of N.F.L. games. The employee — a midlevel content manager — won $350,000 at a rival site, FanDuel, that same week.
“It is absolutely akin to insider trading,” said Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff in Fort Lauderdale, Fla. “It gives that person a distinct edge in a contest.”
"Akin"? Maybe in the way that second cousins once removed are kin.
Black's Law Dictionary defines "insider trading" as "The use of material, nonpublic information in trading the sharesof a company by a corporate insider or other person who owes a fiduciary duty to the company."
Obviously, no shares were traded here. Was there an equity security of some other sort? No. Was there any kind of security on these facts? No.
So why are people rushing to throw around terms like "insider trading"? Because they either want to regulate the DFS industry, sue the industry, or ban the industry. They figure calling what happened "insider trading" gives their private anti-industry agendas a leg up.
What we have here is a very simple breach of agency law. As Restatement (Third) of Agency § 8.05 explains:
An agent has a duty ... not to use or communicate confidential information of the principal for the agent's own purposes or those of a third party.
In sum, let's not make a federal case out of this mess.
Update: Another website claims that having access to ownership data is the "functional equivalent" of insider trading. Wrong. Set aside the fact that there is no security here. Having access to DFS ownership data is helpful. Avoiding players who are owned by half the pool is often a good strategy. But it doesn't guarantee that you'll cash. In most cases, by way of contrast, insider information locks in a profit.
So asks a new paper, in which I--speaking as a Packer's shareholder--took interest:
The Green Bay Packers are an oft-misunderstood organization — not in the decisions that the Packers make, but in their legal status and structure. Scholars, commentators, and even the general public refer to the Packers as “community-owned.” While this characterization is true — to a degree — the specifics of this unique ownership structure in professional sports have never been comprehensively documented and analyzed. Perhaps this is the reason that some political pundits have termed the Packers “socialists.” However, such commentators also seem to not fully appreciate the historical development, and contemporary understanding, of this social, economic, and political ideology. This confluence of confusion has led to the misapplication of the term socialism to the Green Bay Packers. This article seeks to set the record straight.
Parlow, Matthew J. and Mittal, Anne-Louise, Are the Green Bay Packers Socialists? (July 8, 2015). Virginia Sports and Entertainment Law Journal, Vol. 14, No. 2, 2015; Marquette Law School Legal Studies Paper No. 15-2. Available at SSRN: http://ssrn.com/abstract=2628250
... economic theory says we should make decisions based only on the costs and benefits that a course of action has in the future, not on “sunk costs,” which we’ll never get back. When you finish a plate of food you don’t really want just because you already paid for it, you’re falling victim to the sunk cost fallacy. On a bigger scale, the sunk cost fallacy can lead a company to keep pouring money into a failed venture, or a nation to keep pouring resources into a hopeless war.
Which brings us back to the Redskins.
In other words, all those draft picks the 'Skins gave up ought to be irrelevant to the decision of whether to make Kirk Cousins the starting QB.