DFS Legal Battle Claims First Casualty as Tradesports Closes Shop

Variant fantasy-sports site Tradesports.com announced this morning that it will be closing up shop as of November 30 and all of its long-term contests which are scheduled to run beyond that date will be canceled and their buy-ins refunded. Player funds will be kept secure and available until the end of the year, but users of the site are being asked to submit their withdrawal requests by December 4 to ensure expedient processing.

In its message to its customers, the site explains that the decision to close was brought about by a combination of two factors; the site never had enough users to be profitable in the first place, and the problem has only been compounded by “recent negative events in the industry.” The latter clearly refers to the scandal at DraftKings and the ensuing regulatory uncertainty which has now culminated in a legal battle between DraftKings/FanDuel and the New York Attorney General. It’s easy to see how a site that was losing money even in the unregulated heyday of daily fantasy sports (DFS) would deem it a losing proposition to continue investing resources in trying to build traffic even as one state after another introduces new hurdles to such sites operating, or moves to ban them entirely.

It’s a shame to see Tradesports go, however, because they actually had a fairly innovative twist on the fantasy sports genre. As with other DFS sites, the players involved in a contest were given a certain amount of virtual currency to spend and the winner would be the one whose picks turned the maximum profit. Rather than those picks being individual players, however, on Tradesports, players would spend their virtual currency on “shares” of various Yes/No propositions, such as whether a given quarterback would throw two interceptions in the course of that week’s game, or whether a given team would score at least 20 points.

Where things became more interesting – particularly for longer contests – was that players retained the right to buy and sell shares throughout the contest. Since each proposition was a simple Yes or No, shares were created in Yes/No pairs with a total cost of 100 units, with the correct answer paying out 100 at the end of the contest. Thus, if I felt the odds of a Yes answer coming through were at least 65%, I could place a bid of 65 for Yes, and if there was another user in the contest willing to play 35 for No, that trade would go through. If the price for Yes shares later rose, then rather than hang on to them, I would have the option of trying to sell them off for a profit and use the resulting virtual currency to invest in a different proposition.

Unfortunately, although interesting, this is rather more difficult to wrap one’s head around than simply picking some number of players and hoping they do well. Of course, there’s a huge amount of complexity involved in playing DFS well, just as there is in playing poker well. But what DFS and Texas Hold’em have in common are that the barrier to entry is very low, as the rules and objectives can be explained in a few breaths. That sort of deceptive simplicity is key for attracting recreational gamblers to a new product; while the idea of a realtime stock market for proposition bets is appealing to me and probably to others who spend a lot of time thinking about games and probability, it’s not hard to see why Tradesports was having a hard time gaining traction among the general DFS public.

Tradesports may be the first operation to fold as a direct consequence of the current legal battle, but it’s not the first to run into more general problems with profitability; back in May, ScoreStreak – which also tried a twist on the usual DFS formula – announced that it was “temporarily” suspending operations, until such time as it could secure additional funding. The website is still up, but closed for business, and if ScoreStreak was unable to find additional investment capital over the summer, it’s highly unlikely that they will as things stand now. It’s likely that many of the smaller sites are on similarly shaky financial ground, and the legal battle in New York may mean we haven’t heard the end of closures, particularly if it starts to look like DraftKings and FanDuel are going to lose.

Alex Weldon (@benefactumgames) is a freelance writer, game designer and semipro poker player from Montreal, Quebec, Canada.

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