Sign In Get the App $ $
dk sbnc
(Photo: Brett Smiley)

A class-action lawsuit filed last Thursday by a DraftKings Sports Betting National Championship (SBNC) contestant, regarding the controversial outcome and the company’s handling of the inaugural contest, assures that discussion of the bold event will continue for the wrong reasons. Nobody enjoys litigation except the law firms billing hours, but here we are.

By now you’ve probably heard about the ending to the inaugural SBNC: With 32-year-old poker dealer and Philadelphia Eagles fan Randy Lee rightfully going bonkers, courtesy the Eagles’ cover against the New Orleans Saints in a Divisional Round contest on Sunday, Jan. 13. Meanwhile as the game unfolded, at least a dozen other contestants in the $10,000-entry tournament tried to come to grips with just watching — while their betting funds were inaccessible.

Below we will briefly recap the controversial denouement, and then get to the purpose of this article — to review the most salient and lesser-discussed topics, and examine what exactly went wrong that led to chaos and a class action suit.

To that end, we have corresponded with a central actor of the story, professional sports bettor and third-place finisher Rufus Peabody; plus half a dozen other contestants weighed in, including James Salinas, first-place finisher in the 2015 Westgate Las Vegas SuperContest, also the third-place finisher in 2016 who also cashed at 26th in 2018.

The post-PASPA state of U.S. sports betting is still just seven months old now. FanDuel excluded, DraftKings is dominating the field in New Jersey, which saw its betting handle exceed $300 million in both November and December 2018. The company is poised to become one of biggest sportsbooks in the country. It already has a presence in Mississippi, West Virginia and soon(ish) perhaps, in retail form in New York. DraftKings had the gusto and guts to put on a very exciting event — notwithstanding the controversial result — that will impact the way competitors and DraftKings itself approaches future contests of this kind.

The SBNC wasn’t a regular $20 buy-in NFL Milly Maker. “This was real money,” as Peabody, who bought in for $10,000 (as opposed to qualifying via DFS contest), put it on his recent ‘Bet the Process’ podcast.

Here we don’t intend to serve as insurance adjusters, but to pull back a few layers and shed some light.

Turning $5K into $1M: The rules

It was a three-day tournament. Everyone started with a $5,000 bankroll. Everyone would take home whatever was left of their bankroll at the end. Contestants had to use the DraftKings Sportsbook mobile app or web platform to place wagers. DraftKings built a sportsbook-like venue for contestants in Jersey City, New Jersey, although many including Peabody chose to focus in the quiet of a hotel room or an AirBnB rental. On Friday, Jan. 11, and Saturday, Jan. 12, contestants could bet on whatever they wanted. Organizers didn’t specifically state what the betting limits would be on each market (props, parlays, otherwise). Then on Sunday, contestants could only bet on the two NFL Divisional Round playoffs games, but nothing after Eagles-Saints — with a scheduled start time of about 4:40 p.m. ET — kicked off.  Whoever had the biggest bankroll at the end of the game would win the $1 million top prize. Likewise, the other top-heavy prizes were awarded based on bankroll size.

But a major flaw in the tournament’s structure manifested at the Eagles-Saints kickoff, when some players gained access to winnings from wagers on the earlier NFL Divisional Round game — Chargers at Patriots — while others did not receive them in time, and were unable to place a bet on the final game.

We learned later that all throughout the tournament, the DraftKings Sportsbook system graded wagers and funded accounts on winning bets inconsistently.

So, let’s go there next.

Inconsistent, unpredictable processing of wagers

A criticism we heard from numerous participants and one that appears prominently in the complaint (“Complaint”) is that the sportsbook graded wagers inconsistently — some taking much longer to process than others, and some props were even graded in-game, before a contest concluded.

One contestant, Darren Summer, said on Saturday night that he waited several hours to have a player prop wager on Colts running back Marlon Mack graded.

“To have a bet you know is won, but wasn’t graded in time to bet the next football game was frustrating… so I ended up chasing on Saturday night,” he explained. “I get that there’s a lot going on, but this is a $10K buy-in and $2.5 million prize pool… if it’s going to take two hours to grade a fantasy prop wager, I would like to know in advance. You strategize as bets are in action what your next bets will be. So to have a gameplan but not being able to execute it was really frustrating.”

Several players offered similar accounts — waiting a long time after a game concluded for their wagers to be graded to make funds accessible to put back into play.

Then on Sunday during the Chargers-Patriots game, at least two props — one on Chargers wide receiver Tyrell Williams and another involving Patriots running back Sony Michel — were graded as Overs before the game had concluded, when yardage losses theoretically could have made them go under.

It is our understanding that all contestants making the exact same wager(s) were graded simultaneously, assuming they were not tied up with parlays for earlier or yet-to-be decided events.

However, even when the same or similar wagers were graded, or settled, funds were not necessarily made immediately available in the players’ account. For an example of that, we compare Peabody’s experience with another front-runner late on Sunday, ‘moneylinemikey’ (“Mikey”), who ended up finishing sixth overall.

Look at the spreadsheet here produced by Julian:

As you can see from the spreadsheet, Mikey’s winning parlay on Patriots -3.5 and the Over was graded at 4:36 — 26 seconds before Peabody’s straight bet– and funds were made available to Mikey to bet 12 seconds later, and again about four minutes after that. Yet Peabody’s funds from his win didn’t hit his account (check the timestamp on the bottom of his screenshot showing 4:41:44) until after the Eagles-Saints game had started. Thus, he was locked out, his bankroll at $81,891.83 but frozen there as the game unfolded.

This problem was completely foreseeable, and actually was foreseen

From the welcome packet participants received electronically before the contest, consider the relevant portion beginning with “If the Patriots vs. Chargers”:

And then in an email from organizers to participants on Sunday morning (item 7):

This is what Peabody, who was all-in on Patriots -3.5, said about the availability of a “cash out”:

After the contest concluded and Randy Lee came out on top, a spokesman for DraftKings, James Chisholm, said in a statement:

“We recognize that in the rules the scheduled end of betting [kickoff of the NFC divisional-round game] coincided very closely to the finish of the of Patriots-Chargers game. While we must follow our contest rules, we sincerely apologize for the experience several customers had where their bets were not graded in time to allow wagering on the Saints-Eagles game. We will learn from this experience and improve upon the rules and experience for future events.”

Other contestants charted a different course, and did not push all-in on the Chargers-Patriots game. The eventual winner, Lee, had only made two in-game wagers for about $6,000 on the Chargers point spread. Then about 15 minutes prior to the kickoff of the Eagles-Saints, he pushed his available $47,500 bankroll on the Eagles +8.5, which proved to be a winner.

“I wanted to see what everybody else was going to do with their stacks,” Lee told SharpSide of his decision to not wager as much of his bankroll early on Sunday compared to many of his competitors. “I was at the top of the leaderboard coming into the day and I wanted to see where everyone’s stacks were. We were only allowed to bet on the two NFL games today, so I wanted to see what everyone was sitting at, and I had a pretty confident bet in mind with my stack. As long as everything went right in the first game, I felt like I had a pretty good shot with my bet in the second game if I went with it.”

The second-place finisher, Daniel ‘nomoreiloveyous‘ Steinberg, took a similar approach, and vaulted into second with a winning $35,000 bet on the Eagles +8.5.

“I think maybe I was a bit on the paranoid side thinking that my bet wouldn’t be graded on time in the Patriots-Chargers game,” he told Dan Back on the PropCast podcast a few days after the event. “Most of the time that bet gets graded on time and there’s not a problem. But I’m certainly a very paranoid person, so I was thinking of that. I don’t want to pretend that I was a  genius who thought about my funds getting locked up, nor did I think it was the most probable thing to happen. But I really did not want to tie up my money because I figured if I did, I’d possibly have no chance to win.”

Ultimately that’s exactly how it played out. Peabody’s funds were locked, his bet “settled,” but funds unavailable.  

“[DraftKings] offered more than 400 individual markets on the Patriots-Chargers game,” Chisholm told RotoGrinders. “Not everything was graded simultaneously. There was always going to be a lag. Given the tight time frame, some were paid out in time for funds to be wagered on the second game. Others, because the way the system works, were not graded and paid out in time.”

“Our back-end system functioned as it should have,” Chisholm added. “There’s no way for anyone at DraftKings to change or prioritize certain accounts or wagers. Contestants were betting in a public market with thousands of other customers. My guess is that every mobile sportsbooks in New Jersey would have experienced the exact same situation.”

Yet, DraftKings was the only online sportsbook putting on a contest with a $10,000 entry fee and a $1 million top prize. Hence the scrutiny.

Special treatment?

This is a hotly contested issue.  Here’s what the plaintiff, contest participant Christopher Leong, alleges in the Complaint (paragraph 90, emphasis added):

“[DraftKings] breached this duty by crediting different bettors with winnings from the same game at different times, by accepting certain wager types on given games from certain bettors and rejecting similar wager types on the same given games from other bettors, by manually grading wagers at the request of persons physically present in Jersey City, by accepting some wagers after the close of betting from certain contestants and disallowing them from other contestants, by accepting or rejecting wagers from some contestants in a matter of seconds while waiting up to ten minutes to accept or reject wagers from other contests, and by generally operating the SBNC in a shoddy, arbitrary, capricious and haphazard manner that falls well below the most minimal of obligations owed the betting public by a licensed sports betting operator.”

Leong and others joining the action contend that persons present at the Jersey City watch party successfully obtained help from DraftKings employees, and had their wagers processed upon request, or at least prioritized ahead of others.

We’ve heard varying accounts about this.

“My first-hand account is seeing players and DK’s help desk interacting,” Mike Brown, aka ‘h3budda’, who was present at the VIP sportsbook, told RotoGrinders. “I cannot say I saw X player or Y, but there were certainly laptops being brought into the room. While I was there, if I were in the running, I would have been going in seeing if it were possible. Everyone who was there had an equal opportunity to try and go to the help desk. They may have been able to get it sped up, but I never saw anyone come out of the room with a grin or anything. I was on the couch second closest to the room.”

DraftKings vehemently disputes that persons present at the venue had their wager processing expedited.

“It is absolutely, patently false, that anyone on-site having to have individual bet faster,” Chisholm said. “It’s technically impossible for someone who was on-site at DraftKings to do that. Joe’s bet is one of the thousand. No one on-site could have done that. No one received preferential treatment and the rules were applied fairly.”

Peabody has heard differently:

This is a he-said he-said situation and we don’t know for sure whether anyone did have their wagers graded early or had their funds credited to their account by request. This piece of the puzzle will come into focus during depositions, if this case proceeds to discovery.

Peabody’s would-be play?

Would Peabody for sure have won the $1 million top prize, if the system would have made his funds available in the four-minute window between the stated settlement time and the Eagles-Saints kickoff? The same window in which ‘moneylinemikey’ gained access to winnings from a Patriots spread/total parlay, of which he used the entirely to reinvest on the Eagles?

“I was trying to get above the point where someone behind me could double up and catch me,” Peabody told RotoGrinders. “Depending on how many people below me looked like they were shoving, I was going to go with a Saints alternate point spread risking everything that got me above the number I thought I needed. Saints -5 -175 was most likely. Saints -4 was on the table as well. If I wanted to double up, my best edge on the game was the under, but given I thought so many people behind me would be on Eagles ML (possibly parlayed with the total), I wanted to be in a position where the only way I lost was if the Eagles won (or someone hit some ridiculous parlay).”

Peabody told ESPN’s David Purdum and Ben Fawkes: “I had spent the last 2.5 hours running over all the numbers. And, as it goes at the end, I was going back and forth: ‘Which one am I going to do? Am I going to pull the trigger?’ It was going to be a Saints bet of some kind or the under. Unfortunately, I didn’t get the chance.”

Uncertain betting limits vexed bettors

Setting aside the calamitous ending, confusion about the contest rules brewed in the days leading up as contestants and others considering registering wanted to begin formulate a strategy — whether to bet props, bet parlays, some combination, just go straight bets and roll over a bankroll, take it easy on Friday then push on Saturday. But what were the limits for each kind of wager on each day?

From the contest rules section that reads, “What are the betting limits?”:

“Betting limits for all competitors will be same at all points in time although maximum bets may change as the start time of an event approaches and vary by sport and market. Submitted requests for a bet in excess of the maximum bet will be denied. Betting limits are not publicly posted but will not limit competitors ability to wager in major sport markets.”

Three days before the tournament, Jon Aguiar, identified in the Complaint as a DraftKings Senior Product Manager and spokesperson, responded to a question on Twitter:

Aguiar also said:

But that didn’t cut it for participants. Even if they were on equal footing with respect to competitors — a point disputed in the Complaint — they were all still flying blind as to how much they might be able to get down on the next bet or final bet.

“We had no idea of the limits of anything going in,” contestant Matthew Schmitto told RotoGrinders. “They said they’d be the same for everything which is good but still we couldn’t really strategize without knowing. They should have sent out the limits each morning or something.”

Another tournament participant who finished in the black and spoke on condition of anonymity, told RotoGrinders:

“It’s unfair to not post max bets and then have your account adjusted based on the entire market, including people not in the event. Since [DraftKings] didn’t have enough action on the entire book, my limits were tiny.”

“If I had uncapped rules or even 5K limits, I max bet two parlays a day and shoot for six player props to go 2-0 Friday 2-0 Saturday 2-0 Sunday,” the source continued. “This is a betting competition. Let people like me have a chance to win so I can compete with the guy getting 50K down on straight bets. The amount of work and win rate I have to produce to compete is totally disproportionate.”

The matter of limits is now a major point of contention in the Complaint. A pro sports bettor who also wishes to remain anonymous, writes in an email: “The lack of published betting (and win) limits was always going to be an issue, given”:

Some problems began earlier

Other common complaints we heard concerned registration for the event, setting up betting accounts associated with the event, and funding.

“My PayPal is set up as business account so some there’s limitations,” Summer said. “That was the biggest challenge. As a new user, I tried ACH but kept getting error messages. Needed to have manual override. Submit documents, call PayPal, call Wells Fargo… DraftKings was responsive, but only via email. Not by phone.”

SuperContest legend James Salinas, who flew in from Colorado, had a similar experience.

“There wasn’t a lot of clarity out there with how to register and get set up,” he said. “I had to do a lot of investigating myself to find these things out. You’re ponying up $10K. That’s a significant amount of money for any type of event and especially since they’re are taking some off the top. I’m curious where that money goes and hopefully the next time they do this, that money will be better spent into building a better customer service base.”

Both Summer and Salinas were disappointed that personnel at the Resorts Casino Hotel in Atlantic City, where a retail DraftKing Sportsbook is located, didn’t know what was going on up in Jersey City, where the makeshift sportsbook housed some participants.

“Someone at the Resorts cage said registration closed on Friday afternoon,” Summer said. However, registration was open until 4:00 p.m. on Saturday.  

Peabody also flagged difficulty registering as an issue and found DraftKings was not responsive to emails.

Connectivity and geolocation problems cropped up once the contest started

“I had connectivity issues,” said Peabody, who stayed in his hotel during contest play. “[The web platform] thought I was in New York, so I needed to use my phone. I don’t think I should be disadvantaged when I’m in a specific location.”

Discussing one crucial point on Saturday in which he attempted to hedge against a would-be five-leg parlay that would have paid $20,000, said Salinas, who watched in Atlantic City:

“I couldn’t access the sportsbook, and I had three devices. I had my cell phone, I had a laptop, and I also had an iPad. So I had all these options just to be totally prepared. Triple check, to have everything that was necessary.”

“The parlay came down to the last leg, on Dallas, and there was plenty of time,” Salinas explained. “I had four basketball games and all those had already come in… then I was looking at, what are my potential hedge opportunities here? Because it was a large wager. And that’s when I couldn’t access my account online. So I literally sent multiple, multiple emails to them and it was funny how at least three to four hours plus later I finally hear back at halftime. And at that point the Rams were laying ten. There wasn’t a hedge opportunity anymore.”

Salinas explained about the customer service experience:

“The hedge was gone and that was quite frustrating. Technical issues I can see those things happening, anytime you’re dealing with phone apps and those types of things but the bigger thing… more frustrating was just the lack of support from customer service. I got nothing, nobody responded to a single email, there wasn’t like a hotline to call so it was just strictly emails. I wasn’t in Jersey City, I was in Atlantic City at Resorts where their staff basically wasn’t sure what they were doing.”

Could DraftKings have averted crisis mid-contest?

According to the rules, theoretically, yes, as Peabody points out:

Lawyers or compliance officers would have had to be involved in a decision. This CYA clause probably only would have been tapped in a period when betting was off, late on Friday night or Saturday night.  

Because there was such a narrow window in which organizers could have attempted to adjust the rules in the interest of fairness, it’s exceedingly unlikely DK would have changed course on the fly. And if they had, others such as Lee and Steinberg may have found grounds for objection and become the contestants leading a lawsuit.

How about the New Jersey Division of Gaming Enforcement?

According to the Associated Press, the DGE said on the day after the tournament that it is reviewing the matter. As it should.

But where was the DGE during the weeks leading up to this event? Did it review the rules and identify some of the issues that eventually arose and evaluate the preparedness of the DraftKings operation? If not, why, for such a high-stakes, first-of-its-kind event?

If they signed off on the contest rules and gave their blessing, perhaps they share some blame. If they did sign off and give their blessing, likewise.

For now, the lawsuit rolls on, and so does the DGE’s examination of the matter. The outcomes of both will help shape the second edition of the SBNC, which at this time appears almost a certainty to happen.