Jeremy Greenfield of TheStreet.com predicts that a scandal rocking the Daily Fantasy Sports sector will do nothing to stop the industry’s phenomenal growth.
The reason, Greenfield suggests: Cheating scandals have rocked Wall Street and they have rocked casinos. Folks still play the Stock Market and they still gamble.
What occurred last week is akin to insider trading.
An employee at DraftKings, one of the two major companies, admitted to inadvertently releasing data before the start of the third week of NFL 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 Fla.-based sports and gambling lawyer, quoted in The New York Times.
Greenfield expands further:
The markets are widely considered to be rigged, especially against those with an information or technology gap. The latest and most visceral example was chronicled in Michael Lewis’s 2014 book Flash Boys. The book describes how high-frequency traders have worked entirely within the letter of the law to make consistent trading profits.
High-frequency trading firm Virtu (VRTU – Get Report) has had only one losing day of trading in six years. The company’s explanation for how it does this should infuriate every investor: “if you do anything and you win more than you lose…you’re going to be profitable.”
The reason the SEC hasn’t gone in slide rules a-blazin’ is that what Virtu and other similar firms are doing is currently legal (just like Ethan Haskill at DraftKings!).
Despite high-frequency traders, the markets continue to run. Despite the recent Libor scandal, the forex scandal, Bernie Madoff and so many others, the markets trade on. (Read: When there is lots of money at stake, people will cheat.)
Greenfield agrees that regulation will likely evolve as a result of this incident.
Don’t be surprised when that changes, with lawmakers making rumblings about taking a closer look at this business, per The New York Times article.
– Dan Shapiro, Gambling911.com