FSTA: Fantasy Aces debacle should help regulation push rather than hinder it

Q: The FSTA received some criticism after one of your members, Fantasy Aces, went bust, taking with it around $1.3m of player funds. Does that incident change how you vet members?

A: We don’t police or audit our membership. We are an advocacy group and it’s not in our charter to audit these companies on a moment by moment basis. That said we provide very clear and repeated advice on this topic and the necessity of keeping player funds sacrosanct. Any company that doesn’t do that, we can expel them – we have suspended Fantasy Aces’ membership, but we’re not policing that in the first place. They knew what they were doing. They don’t need our guidance to know that spending player funds is wrong.

I imagine they fully intended to segregate funds but at some point it appears they got desperate.

Q: Have you reached out to the company founders, the Frisina family?

A: I’ve tried several times and only had cursory responses, mostly telling me they can’t talk and that their counsel says they shouldn’t be communicating, so I’ve not got anything substantive from them.

Q: What kind of impact do you think this incident will have on the wider regulatory push?

A: Well it clearly doesn’t help, but it’s too early to know if it will harm our effort on getting formal legalisation in the states we’re working in. In fact part of the regulatory framework we’re working on aims to give states the ability to do on-demand audits.

We’ve been asking for this and, in a way, this incident may not hurt us too much because we believe this incident reiterates the need to get regulatory process in places.

Q: Fantasy Aces was in fact under a provisional license in New York, but no flags were raised there. Do you think more frequent or thorough audits are perhaps needed?

A: Because we are so new to this process I don’t know all the levers the regulators have, but even a cursory examination of Fantasy Aces accounts would have shown some issues. Their bankruptcy filings appear to show over a million dollars in player accountability but only a few thousand dollars in the accounts. Had states looked at their situation I think this would have been apparent earlier.

Q: Does the failure of FantasyAces suggest we could see more M&A activity as the smaller companies try and stay afloat?

A: There’s just not many companies left for that kind of thing. We’re down to like five companies from 50 two years ago, so honestly I think the industry has shaken itself out already. The only companies I can think of off the top of my head are DraftDay, DraftPot, Draft and the big two.

Q: Do you think companies should be looking for international expansion, given the apparent difficulty of the US market?

A: People have accepted that the DFS model is scalable anywhere in the world and there ought to be an appetite for it. We’ve seen successful soccer and cricket launches in India, for example. Broadly we feel there should be an international appetite for daily and the prospects for growth remain strong.

In many of the countries where there’s a sports betting regulation, they have frameworks in place that can be easily applied to DFS companies so we think it will provide a better model for regulation than what we are trying to do, which is kind of inventing regulation on the fly.