The discussion is all over the place ITT:
-Fanduel is not in the same universe as Phenoms or other fantasy sites to go broke. If it were to pull off a fraud, it would be more similar to the accounting manipulations Enron or Worldcom than some Joe fantasy league that turns belly up because the guy blew all of the cash. You don't get investors like KKR to give you hundreds of millions of dollars if you any "random dude might steal my money risk". They certainly have tight controls even on the funds that are held in escrow, I'd imagine in some sort of money market funds to earn a return on the roughly $370 million dollars they held last year during Q4 alone -- that number could approach a "bill" during Q4 2015. Strict monetary controls are required by VC firms in exchange for their capital contributions.
-Yes, its more like a casino, and Gaming is a huge source of profits (for the casinos). The difference is, Fanduel has to run a server while Bellagio has to run a gigantic hotel with thousands of staff and tons and tons of overhead, comply with complicated gaming regulations, etc. etc.
-I don't think that Fanduel is even 1% as socially harmful as the lottery (particularly scratch offs) or gaming cities like Vegas and AC. There are sure to be compulsive gamblers who spend too much and lose more than they afford. But I don't think it's quite as predatory as those awful commercials for the lottery giving the poor a glimmer of hope if they just buy a few scratch offs because hey, 'You never know, right?'. Every bodega in NYC has a handful of working class poor who come in and throw away half their pay check every week. Hopefully even the biggest DFS fans aren't anywhere near that level.
-The DFS market is not yet saturated. It continues to see exponential growth. Take a look at Fanduel user growth by year during NFL season"
2011 = 17,000
2012 = 69,000
2013 = 192,000
2014 = 1,012,000
If they continue the same trend of growth in 2015, the number of users during the NFL season could be over 4 million. Realistically, the growth has to switch from exponential to linear at some point and they'll probably hit half that number, so more conservatively, about 2 million users on Fanduel coming up in 2015. However, that is just scratching the surface of the fantasy sports industry. There are an estimated 56 million fantasy sports players across all sports. Almost 20% of the adult male population. We've all seen the proliferation since the early 2000s and now fantasy football has come to dominate ESPN and popular culture to some extent.
The thing is, as sites like Fanduel and Draftkings grow and grow, they attract more and more casual users who are the kind of players that play in home-town, group of buddies season long leagues. The kind of guys who threw a couple dollars at Party Poker back in the day. More and more users means softer competition. If Fanduel breaks 2 million users this year, it will certainly be 'easier' to earn a profit than if there were a couple hundred thousand users -- I noticed this distinctly last year as compared to 2013 due to the 425% user growth during Q4.
Training camp can't get here soon enough...