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Are FanDuel and DraftKings Good Bets to Survive?

What’s the over-and-under on daily fantasy sites FanDuel and DraftKings cratering? Is it a matter of months? Years? Decades?

Well, that all depends on the actions they take, the messages they deliver, and the aggressive new systems they put into place in the coming days. Both companies face issues that cut right to the heart of their brand integrity. Either they confront those issues head-on and restore trust and credibility – or risk a significant erosion of consumer trust.

What should they be doing right away? A whole range of imperatives, but first and foremost, they need to establish a zero-tolerance policy for their employees using privileged information to place their own wagers – either on their own site or a competitor’s. A DraftKings’ employee cashing in a big wager at FanDuel gave both companies a black eye. A no-nonsense code of conduct must be adopted by all employees – with mandatory ethics training built into every employee’s orientation.

Second, they need to assure customers and prospective customers that their proprietary data will be carefully safeguarded – and not sold, manipulated, or exploited by an internal or external party. An independent third party with an impeccable financial background should be brought in to approve the transparent new system.

And third, they need to make sure that they’re marketing and advertising reflects a renewed commitment to trust and accountability. Running the same ubiquitous radio and television ads on sports channels just days after the integrity of their operations was called into question will hurt their credibility. Isn’t it far better to run transition commercials that acknowledge missteps – and assure customers that those missteps have been corrected?

Sports skill gamers are not unlike day-traders in stocks. The Average Joe is competing against users who employ sophisticated algorithms to submit thousands of entries and edit them in nanoseconds when information dictates. All of which makes it doubly critical for FanDuel and DraftKings to adopt the strictest possible standards. The issue not just a few insiders with the capacity to break the rules; it’s outsiders who are playing within the rules but with different tools that give them a significant leg up. Congress is now watching both sites closely and may soon initiate an investigation.

DraftKings and FanDuel both owe their remarkable growth to the venture capitalists who took the chance that the companies’ leadership had the foresight and discipline to make sports skill gaming work.

That leadership now owes their investors a resolute effort to demonstrate that the bet was a good one.

Timothy M. Gay is a senior vice president at LEVICK and the author of a book that exposed the role gambling played in the early days of professional baseball.

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