FanDuel helped turn fantasy sports into a billion-dollar business. But in 2015, the industry faced a backlash. Nigel Eccles, FanDuel's co-founder and CEO, lays out the moves he took to douse the crisis and move on.
--As told to Jeff Bercovici
During football season of 2015, the daily fantasy sports category really burst into the mainstream. A lot of that had to do with the huge amounts of advertising we and our competitors were running, which attracted a lot of consumer interest but also created an environment of scrutiny.
What really sparked everything was when an employee at one of our competitors, DraftKings, accidentally shared online some information on player "ownership"--the number of people who'd picked, say, Tom Brady in their fantasy lineup. In theory, having that information early can be an advantage. Then that weekend, the same employee won $350,000 in one of our tournaments. To the media, it was evident there must be something nefarious going on, and that very quickly became the headline story. In reality, it would have been impossible for him to cheat with the data he had, and our internal inquiry showed there was no pattern of abuse.
We knew we were going to have a real crisis in terms of perception and consumer trust. The first thing we did was immediately ban employees from playing on any fantasy sports sites. We also brought in a former U.S. attorney general, Michael Mukasey, to do a review of company policies, and instituted an advisory board of people like appeals court judge Michael Garcia, former Homeland Security secretary Tom Ridge, and former Major League Baseball executive Tim Brosnan to look at our processes.
The public narrative implied that we were opposed to regulation. That wasn't true. For two years, we had been pushing for self-regulation through an industry trade body. When the crisis hit, it became clear that self-regulation wasn't going to be sufficient and we needed state-by-state regulation. We came out and said we were supportive of consumer protection. That was very helpful in turning the narrative around.
From October through January, we got a series of negative opinions from state attorneys general saying we weren't compliant under their state laws. But in parallel with that, our lobbyists were talking to legislators in all those states to ensure they were well informed about what the product was and who the users were. We pushed for industry-wide consumer protections, such as age verification and segregating user funds from operating funds. We also did a grassroots campaign, encouraging our users to email their legislators. In January, we started to see bills passed that clarified the legal status of fantasy sports as a taxable business. It's clear the industry's moving to a future with regulation in 40-plus states in a few years.
When John Oliver devoted an entire segment to a takedown of daily fantasy sports, that was definitely a moment of realization for me. I thought, "This isn't right. John Oliver takes down people like Fifa president Sepp Blatter and Donald Trump, big names. We're a little guy. We're a startup." But then I realized, we're not a little guy anymore.