What Is Going To Happen To High-Stakes Fantasy Football?

Walla Walla · Post by **Walla Walla** » Sun Jul 03, 2011 3:12 pm

I don't have a dog in the fight about contests. Sorry Mr Vick. But I did lose an Aunt last year who had the same thing Dustin has now. It's not good. Prayers offered to Dustin and Family. Putting the news about Dustin at the end of a company sign up message was tacky though. It was a sleazy move. I actually felt sick when I read it. I may be crude and stupid at times. But I do have a heart.

DoubleG · Post by **DoubleG** » Sun Jul 03, 2011 3:26 pm

Originally posted by Greg Ambrosius:
I think "escrow" is the new buzz word in our industry, but how it's being escrowed is more important than just saying some prizes are escrowed.
How escrow should work:
An independent and trusted third party receives money from the high stakes fantasy contest and holds it until the season is over and winners are identified. The independent 3rd party disperses the money directly to the winners.

Curious if companies that are (or will be) advertising "escrow" actually follow that. if the high stakes fantasy companies have access to the money during the season or after the season, there is nothing preventing them from "taking the money and running", ie, hoodwinking the fantasy community on how they are using the term "escrow"

[ July 04, 2011, 05:01 AM: Message edited by: DoubleG ]

Glenneration X · Post by **Glenneration X** » Sun Jul 03, 2011 4:30 pm

Originally posted by DoubleG:
quote:Originally posted by Greg Ambrosius:
I think "escrow" is the new buzz word in our industry, but how it's being escrowed is more important than just saying some prizes are escrowed.
How escrow should work:
An independent and trusted third party receives money from the high stakes fantasy contest and holds it until the season is over and winners are identified. The independent 3rd party disperses the money directly to the winners.

Curious if companies that are (or will be) advertising "escrow" actually follow that. if the high stakes owners have access to the money during the season or after the season, there is nothing from preventing them from "taking the money and running", ie, hoodwinking the fantasy community on how they are using the term "escrow" [/QUOTE]Get another PM yet?

da bears · Post by **da bears** » Sun Jul 03, 2011 11:24 pm

If the WCOFF is really taking signups before paying their 2010 winners that is truly pathetic.

Plus like you said Greg how they could possibly go ahead with a $300,000 grand prize. I mean how many players actually are going to play over there this year after this huge mess??? I know I'm not for sure.

Anyways I do wish the best for Dustin in terms of his health but that doesn't excuse WCOFF for failing to pay its winners for month and months.

DoubleG · Post by **DoubleG** » Sun Jul 03, 2011 11:32 pm

Originally posted by da bears:
If the WCOFF is really taking signups before paying their 2010 winners that is truly pathetic.

Plus like you said Greg how they could possibly go ahead with a $300,000 grand prize. I mean how many players actually are going to play over there this year after this huge mess??? I know I'm not for sure.

Anyways I do wish the best for Dustin in terms of his health but that doesn't excuse WCOFF for failing to pay its winners for month and months. ditto

Shrink Attack · Post by **Shrink Attack** » Mon Jul 04, 2011 1:43 am

Originally posted by DoubleG:
quote:Originally posted by Greg Ambrosius:
I think "escrow" is the new buzz word in our industry, but how it's being escrowed is more important than just saying some prizes are escrowed.
How escrow should work:
An independent and trusted third party receives money from the high stakes fantasy contest and holds it until the season is over and winners are identified. The independent 3rd party disperses the money directly to the winners.

Curious if companies that are (or will be) advertising "escrow" actually follow that. if the high stakes fantasy companies have access to the money during the season or after the season, there is nothing preventing them from "taking the money and running", ie, hoodwinking the fantasy community on how they are using the term "escrow" [/QUOTE]Mark is actually right about this.

If a Fantasy contest gives a third party the money to hold, but the game operators have access to that money at any time and actually take the money back to then disburse to the winners, then there's really no protection there and the game operators are misrepresenting that the money is safely secure. That would be a misleading use of the term "escrow" in this situation.

If instead there is a legal contract in place in which the game operators give the entry fee money to a third party, never have access to that money, and then the third party directly pays the winners, that is a different story.

I'm not sure which HSFF contests implement the latter rather than the former.

Greg Ambrosius · Post by **Greg Ambrosius** » Mon Jul 04, 2011 2:16 am

Originally posted by DoubleG:
quote:Originally posted by Greg Ambrosius:
I think "escrow" is the new buzz word in our industry, but how it's being escrowed is more important than just saying some prizes are escrowed.
How escrow should work:
An independent and trusted third party receives money from the high stakes fantasy contest and holds it until the season is over and winners are identified. The independent 3rd party disperses the money directly to the winners.

Curious if companies that are (or will be) advertising "escrow" actually follow that. if the high stakes fantasy companies have access to the money during the season or after the season, there is nothing preventing them from "taking the money and running", ie, hoodwinking the fantasy community on how they are using the term "escrow" [/QUOTE]HAPPY FOURTH OF JULY ALL!!!

Glenn, I know this subject has been debated long enough on these boards, but I think people should realize there are two aspects about "prize rollovers" that should concern us all. One is the legal aspect of them and whether they are legal or not and the second aspect is transparency from the game operators. Let's look at both here.

Is it legal for game operators to allow prize rollovers and not report those winnings to the IRS? That's up for interpretation, according to some people. Some people say they have a legal opinion that taxes aren't owed until cash winnings are received in hand in full, thus allowing the rollovers until the game operator actually pays in cash. It's possible that's true. All I know is that I've asked four different sets of corporate lawyers and all four would not allow this practice to take place, stating that winnings are taxable in the year that the winnings are earned.

One area that we have rolled over in the past with the NFBC and NFFC are free entries into the Main Event from our satellite leagues. Those "winner-take-all" leagues clearly stated that we were providing FREE entries to the winners and did not tax the owners the equivalent of the prize. We did that under our first two companies as the legal opinion was that there was no cash transfer and the prize of a free entry was clearly stated in the rules. Fanball's accounting department did not agree with that interpretation and reported earnings on the value of the entry and I believe STATS will do the same thing. So there is a different interpretation on this area from four different legal/accounting teams and I may ask for one more opinion to find out for sure.

The second area of transparency is as concerning to me as the first one and it should be to the players, too. By transparency I mean that players have no idea how much money is being rolled over by game operators who pay this way and thus they don't know how much money is allowed to remain with the game operators. The rollovers can make the appearance of a strong company when in fact it might not be so financially strong. As a hypothetical example in our industry, let's see how this could work:

Company ABC has hundreds of thousands of dollars in rollover prize money it doesn't have to pay out at the end of the year. It makes prize payments each year, but the rollovers keep getting bigger and bigger. In fact, now prize rollovers are equal to the prize money owed and people get afraid of this contest and they ask for prize money instead of the rollover entries. In essence, it's a run on the bank and the cash isn't there. Company ABC looked financially strong for several years, but now it doesn't have the cash and the rollovers are due what their value is. What happens? The money runs out and it's possible that people are again convinced with discounts to keep their prize money in rollovers and enough money is raised to pay off the rest, thus saving the contest for another year. But the players have no idea how big of a "risk" these rollovers are.

Heck, Company ABC could even "escrow" the rest of the funds going forward, but with that huge rollover figure now hanging over their head, the players have no idea how much risk the contest has. Without rollovers, ALL CONTESTS would show their cash flow ability by taking in entry fees one year and paying out all prizes the next. Contests that can do that each year -- and some of us do that -- are the ones that will never have a "run on the bank" later and are financially sound.

The example above is just hypothetical, but it's obvious that it could play out this way in our industry very easily. The rollovers appear to be designed to help the consumers avoid a tax hit, but in essence they become this beautiful gift to the game operators, who wind up keeping a large percentage of the prize money year round. And that's what is concerning to me and some others.

So there are two aspects here and both are serious for the players. That is why this is a worthy discussion, not a right or wrong answer like everyone is telling Mark and others who bring this up.

[ July 04, 2011, 08:23 AM: Message edited by: Greg Ambrosius ]

texasducks69 · Post by **texasducks69** » Mon Jul 04, 2011 2:18 am

If you run a contest that takes in half a million in entry fees, but has to pay out a million, what protection is escrow?

Even if you are talking about the money being held by a third party and the operators have no access to it, even if its the third party that will make the payouts, if more money has to be paid out than is taken in, what protection is that?

A question for Greg or Tom. If a contest takes signups on a contest for an announced grand prize of 300,000 and then lowers that amount to say 200,000. It is my understanding they have to refund entries to everyone who has entered and start signups anew. not simply give them an option to opt out. Is that true?

A question for anyone who may know. Who is the WCOFF using for a backend provider this year?

RiFF · Post by **RiFF** » Mon Jul 04, 2011 2:28 am

Originally posted by Shrink Attack:
quote:Originally posted by DoubleG:
quote:Originally posted by Greg Ambrosius:
I think "escrow" is the new buzz word in our industry, but how it's being escrowed is more important than just saying some prizes are escrowed.
How escrow should work:
An independent and trusted third party receives money from the high stakes fantasy contest and holds it until the season is over and winners are identified. The independent 3rd party disperses the money directly to the winners.

Curious if companies that are (or will be) advertising "escrow" actually follow that. if the high stakes fantasy companies have access to the money during the season or after the season, there is nothing preventing them from "taking the money and running", ie, hoodwinking the fantasy community on how they are using the term "escrow" [/QUOTE]Mark is actually right about this.

If a Fantasy contest gives a third party the money to hold, but the game operators have access to that money at any time and actually take the money back to then disburse to the winners, then there's really no protection there and the game operators are misrepresenting that the money is safely secure. That would be a misleading use of the term "escrow" in this situation.

If instead there is a legal contract in place in which the game operators give the entry fee money to a third party, never have access to that money, and then the third party directly pays the winners, that is a different story.

I'm not sure which HSFF contests implement the latter rather than the former. [/QUOTE]As it relates to FFPC, for anyone interested, this topic was debated ad nauseum on the FFPC MB's last summer. You can go there and read a thorough discussion on it, including a thorough explanation of it from FFPC's viewpoint.
What I came away from the that discussion with was, what FFPC is currently doing under the "banner" of esc row; is not escrow in the sense most people would define as escrow; i.e. an independent 3rd party holding the funds and then disbursing those funds at the agreed upon time to the appropriate party.

But what I also comcluded is that what FFPC is currently doing with prize monies for its ME, that is placing it with an attorney until the end of the season when it is returned to FFPC for distribution, is a step forward in the right direction for the handling of prize monies. And is an improvement over how other contests are handling prize monies.

Greg Ambrosius · Post by **Greg Ambrosius** » Mon Jul 04, 2011 2:34 am

Originally posted by The Yellow Line is Unofficial:
If you run a contest that takes in half a million in entry fees, but has to pay out a million, what protection is escrow?

Even if you are talking about the money being held by a third party and the operators have no access to it, even if its the third party that will make the payouts, if more money has to be paid out than is taken in, what protection is that?

A question for Greg or Tom. If a contest takes signups on a contest for an announced grand prize of 300,000 and then lowers that amount to say 200,000. It is my understanding they have to refund entries to everyone who has entered and start signups anew. not simply give them an option to opt out. Is that true?

A question for anyone who may know. Who is the WCOFF using for a backend provider this year? There are a couple of good questions here and I'll answer them separately.

WCOFF used RT Sports last year and RT is currently powering the WCOFB and it looks like the WCOFF for now, too. I would assume if the WCOFF goes forward in 2011 that RT Sports would be the first option, but I don't know anything more beyond that.

We know how to reduce your guaranteed prize money first hand because we had to do it in 2004. During our debut NFFC season, I proposed a $200,000 grand prize based on 600 entries and two weeks before our live event it was obvious that we were going to fall short of our goal. So we had to reach out to our 166 teams that were signed up at that time and offer a refund to every team, or have them agree to play under the new prize pool that included just a $100,000 grand prize and a max of 364 teams. All but two teams stayed with us and we refunded the other two, eventually finishing with 224 teams that first year.

If any contest is going to reduce their overall prize pool after taking signups based on previously announced guaranteed prizes, they would have to refund their current members and give them the option of staying with the contest under the revised prize structure or to receive a full refund. Much of this is under the fantasy carveout language in the Anti-Internet Gambling Act.