Yahoo! is under fire from daily fantasy sports players who say their prize guarantee isn’t delivering on its promises. Even worse, Yahoo’s broken promises could spell trouble for the entire DFS industry.
Yahoo! made headlines last week when it rolled out its new DFS product along with a prize guarantee that was sure to be appealing to hardcore players.
The guarantee suggested that the former search giant would pay out full prizes on DFS tournaments, no matter how many players actually signed up. That’s how it was supposed to work but that’s not how things worked out at all.
According to a report on CalvinAyre.com, Yahoo! “guaranteed” to pay out $ 22,000 on an MLB tournament last week that was expected to attract 10,000 players. When only 2,944 players actually signed up, Yahoo! paid out less than $ 8,000 total.
That meager payout isn’t sitting well with players and it could, potentially, cause headaches for the entire DFS business.
DFS sites are considered a game of skill and were granted an exception from the Unlawful Internet Gambling Enforcement Act (UIGEA) based on that status. That status could be in jeopardy if DFS sites begin advertising guaranteed tournament payouts without actually following through on them.
In this case, according to CalvinAyre, Yahoo! was covered because they fronted the tournament entry fee for participants.
That said, this isn’t something the DFS industry should be doing on a regular basis. Not only does it impact player confidence, it’s likely to draw the (unwanted) attention of State Attorney Generals looking to score points by taking down an internet gambling site.
Yahoo! is still on a learning curve when it comes to DFS and it’s very likely that they’ll adjust their policies based on this incident.
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