FanDuel Sportsbook at the Meadowlands Racetrack was the talk of the sports betting town when a technical glitch resulted in the book offering one of the most preposterous lines for a grand total of 18 seconds during a Sunday Night Football game.
The fallout from that 18-second period is proving to be the biggest test to date for the nascent US sports betting industry.
So what happened at the FanDuel Sportsbook?
The saga began last Sunday night, late in the game between the Denver Broncos and Oakland Raiders.
With time winding down the Broncos were trailing by just two points and already comfortably in field goal range. That’s when a New Jersey bettor wittingly or unwittingly placed a bet on the Broncos to win the game.
The Broncos were overwhelming favorites to win the game at that point in time, but the odds the man received (and a handful of other bettors according to other accounts) had a Broncos win listed at 750-1. The win would net the $110 bet around $82,000.
As FanDuel told it:
“The wager in question involved an obvious pricing error inadvertently generated by our in-game pricing system… At that moment in the game, our system updated the odds and erroneously posted a price of +75,000 on the Broncos to win the game (bet $100 to win $75,000) when the correct odds for the Broncos to win the game at that point in time were -600 (i.e., bet $600 to win $100). A small number of bets were made at the erroneous price over an 18 second period. We honored all such bets on the Broncos to win the game at the accurate market price in accordance with our house rules and industry practice, which specifically address such obvious pricing errors.”
Palps enter the US sports betting lexicon
That glitch lasted all of 18 seconds, but the NJ sports betting story is going into its second week.
For most of the week, the eventual outcome was undecided and hotly debated.
Industry types and bettors from more mature markets explained how these glitches (known as palpable errors, or simply palps) are handled elsewhere, which in most cases are similar to FanDuel’s House Rules on palps.
US bettors had a more visceral reaction and were adamant the bet is a binding agreement, and that regulators or the courts would force FanDuel Sportsbook to pay up. Somewhat related, I remember a similar reaction when I said Phil Ivey would lose his edge-sorting lawsuits.
FanDuel decided to end the speculation on Thursday night. FanDuel not only paid the bettor his money on its own accord, but it also used the error as a marketing ploy, offering 82 random accounts $1,000 each.
However, the payment doesn’t bring the incident to a close.
FanDuel paid because it felt paying was the best course of action from a marketing and customer outreach standpoint. It was under no obligation to pay, even though sports betting Twitter will tell you otherwise.
The DGE didn’t compel FanDuel to pay
First off, the New Jersey Division of Gaming Enforcement approved FanDuel’s House Rules which explicitly address palps — unlike the vague, out of context regulation people are pointing to about DGE approval being needed to unilaterally rescind wagers:
A wagering operator shall not unilaterally rescind any wager pursuant to this chapter without the prior approval of the Division.
The prior approval of the DGE everyone thinks FanDuel needed was already given; it was the approval of FanDuel’s house rules.
As Chris Grove said on Twitter:
Second, New Jersey’s blanket rules on commerce in general cover “nonintentional technical errors”:
“13:45A-14.13 Nonintentional technical errors For the purpose of enforcement of this subchapter, “nonintentional technical errors” shall mean inaccuracies in the unit pricing information reflected upon a stamp, tag, label, sign or list where such defects have resulted from a malfunction of a printing press, electronic data processing equipment or other mechanical equipment used to produce such stamps, tags, labels, signs or lists, or from the mistake of a computer programmer or machine operator, where such malfunction or mistake was not within the knowledge or control of the owner or operator or management personnel of the store and where such owner or operator or management personnel could not with reasonable diligence have detected and corrected such errors.”
Put it all together, and it’s quite clear that New Jersey doesn’t require sports betting operators to pay out when there is a palp.
- The DGE approved the House Rules which explicitly cover palps, thereby providing prior approval to rescind wagers if a palp occurs.
- New Jersey commerce laws and regulations provide FanDuel with very clear legal protections.
So, while the visceral reaction is, “pay that man his money,” a close reading of the state’s laws and regulations (and not simply extracting a single sentence out of hundreds of pages of documents) shows that palps are covered by the laws and regulations of New Jersey.
But that doesn’t mean there won’t be any repercussions.
What the DGE will do
FanDuel paid the bettors, but that will be of little consequence to the DGE.
As I said in a previous column, the strength of a regulated market is how it handles mistakes.
As such, the DGE was always going to:
- Investigate the incident and determine if it needs to mete out punishment.
- Consult with operators and industry experts to create a set of best practices to better prevent subsequent pricing errors.
- Clarify regulations governing palps and communicate those policies to the public.
The statements issued by FanDuel and the DGE on Thursday corroborate that FanDuel was not obligated to pay, but needs to improve procedures and communicate those procedures to the public.
From FanDuel:
“These kinds of issues are rare, but they do happen. We have clear house rules about how such obvious pricing errors are treated, which is to pay winners at the correct price.
“For those familiar with the industry these rules are understood, but we realize a lot of our customers are new to sports betting and were not familiar… Going forward, we are working with the New Jersey Division of Gaming Enforcement to improve our processes and procedures. We will also work with others in the industry on educating bettors on these and similar instances and how they work.”
From the DGE:
“The Division is encouraged by FanDuel’s actions today. The Division will continue to work with FanDuel and the State’s other licensed sports wagering operators to ensure the implementation of industry wide best practices.”
Notice that the DGE doesn’t dispute FanDuel’s claim that it has clear rules covering these situations and that the policy is clearly understood by those in the industry.
No precedent has been set going forward, and FanDuel makes it clear it was under no obligation to pay.
What changes can you expect going forward?
Clarified regulations
It’s important to note that the DGE is still working off of the emergency regulations it installed shortly after the NJ sports betting law was passed. It wouldn’t be surprising to see the regulations specifically address palps down the road.
Stronger ticket approval protocols
One of the best practices the DGE and operators will almost certainly implement is a second set of eyes on specific bet types (long odds and large wager size) and improved flagging of suspicions tickets.
Improved training
Another area of obvious need is training. It’s imperative that employees can recognize when something is amiss.
Player education
The final piece of the puzzle will be communicating policies with the public. The only way to avoid the negative attention caused by the FanDuel issue is to educate the consumer and leave zero doubt on how these types of situations are handled.
