DFS players unable to cash out their balances from FantasyHub can breathe a sigh of relief, as DraftKings has stepped in and promised to bail out the shuttered company.
Players began to complain about delays in cashouts at FantasyHub in January, voicing their concerns in a long thread on RotoGrinders. On February 19 the site “temporarily suspended operations” and sent a message to players stating that they were “in discussions with a strategic third-party regarding the future” of the company.
With that notice, speculation ran rampant, and many players became worried that the site had used their deposits for operating expenses, and was now unable to repay its users.
Dipping into player funds
As it turned out, that assumption was likely true, with ESPN reporting that the site owed its users “a few hundred thousand dollars.” Apart from offering DFS contests, FantasyHub often promoted themselves as proponents of charitable giving. Indeed, a portion of the site’s proceeds was supposed to go to several different charities the site supported.
Troublingly, it seems that the site was withholding cash that it had promised to give to charity, likely using it to fund operational costs as well. DraftKings will also settle those accounts and will pay back more than $100,000 in donations owed.
Not an acquisition
In a statement, DraftKings cofounder Matt Kalish was sure to highlight the fact that his site was not acquiring FantasyHub.
“This is a very simple deal, where we’re assigning two liabilities from [FantasyHub] over to DraftKings in an effort to do the right thing for their player base, which has a nearly 80 percent overlap with our own. We never want to see our player base go through an experience that’s negative like this. What happened here was reprehensible. It is a breach of trust for these players and we share a lot of these players with them. We just didn’t think it was the right thing to do to sit on the sideline and let that happen. We had the ability to step up and do something.”
By paying off FantasyHub’s debts, DraftKings is receiving much praise from the shuttered site’s former customers. “Just transferred my 600. Took 30 seconds!,” said RotoGrinders poster ‘pootnami’. “Thanks again dk, I’m a customer for the long haul now!”
‘CuiseJD’ agreed, saying “Just did the transfer! Thank you DK. I am a customer for life!”
In the same thread, RotoGrinders cofounder Cal Spears apologized for not recognizing the severity of the site’s troubles. “The FantasyHub guys fooled a lot of people, including me. I apologize for that,” he said. “We’ll put more resources into ongoing vetting going forward and should be getting additional clarity on player funds as the regulation process plays out.”
FSTA under scrutiny
The incident also brings into question whether the Fantasy Sports Trade Association, of which FantasyHub was a member, did its job in checking that signatories to its charter had indeed separated their player deposits from operating funds. The charter states clearly that its members must “hold player funds… separate from their operational funds,” and that “Player funds will not be used to fund the growth of their business and at no time are player funds at risk if the company were to cease doing business.”
The bailout holds many similarities to when online gaming giant PokerStars agreed to pay off Full Tilt Poker customers, who had been denied their balances due to the company using the cash for operational expenses. Unlike now, however, PokerStars agreed to buy the company and relaunched it after it had remained closed for some time.
Crime and punishment
While FantasyHub players may be getting their balances back, users are clamoring for the site’s three cofounders, Andrew Busa, Steven Plappert and Chris Pierce, to be punished in some way. ESPN reports that at least five players contacted Texas Atty. Gen. Ken Paxton’s office in an attempt to draw attention to the incident. It is unknown if he plans to take action in this case.
FantasyHub’s founders have not made any comment on the recent developments.