Forget The Rake, FanDuel’s Bitcoin Bowl Has An Even Bigger Problem

FanDuel will be the first daily fantasy sports site to try to capitalize on the bitcoin craze by offering cryptocurrency prizes in its upcoming Bitcoin Bowl. The contests kick off FanDuel’s NFL playoff offerings this weekend.

The Bitcoin Bowl carries a $3 entry fee. FanDuel is putting a total of three BTC up for grabs. There is also a free winner-take-all Bitcoin Bowl contest that will award a single BTC to the winner.

More on the DFS bitcoin contests

FanDuel CFO Andrew Giancamilli conveyed the news in a press release:

“FanDuel has always sought to deliver the most unique and rewarding experiences or prizes to our users.

In awarding Bitcoin, we’re recognizing that most of our users are early adopters of technology and have a significant interest in cryptocurrency. Our fans love the prizing aspect of playing on our site and we think this will be a reward that they truly appreciate.”

Even though the Bitcoin Bowl’s prize pool is modest by DFS standards, FanDuel is hyping the contest to its customers in a series of emails and mobile alerts. And with the smaller, free-to-play contest, it appears to be taking advantage of the “fear of missing out” effect DFS sites have used in the past. FanDuel is banking on customers who were given free entries to a small contest then entering a larger contest for fear they won’t cash in on a great lineup.

Many people are praising FanDuel for coming up with the outside-the-box contest.

However, critics are dinging the company for what looks like an inordinately high rake.

These numbers don’t add up

There’s a running joke in the professional poker community about more rake being better for the overall economy (a bastardization of something pro Daniel Negreanu once said). If that’s true, FanDuel takes this idea to a whole new level with Bitcoin Bowl.

The value of a bitcoin is volatile, but their value has held steady at around $15,000 in recent days.

That gives the paid Bitcoin Bowl a prize pool of around $45,000, necessitating 15,000 entries.

The problem is, FanDuel has placed what amounts to no cap on total entries — setting the max entries at 999,999.

If the contest were to fill, FanDuel would collect about $2,950,000 in rake vs. its $45,000 prize pool.

The contest has no chance of hitting one million entries, but it already surpassed the 15,000-entry threshold. (At the time of writing, there are still several days of registration still to go). It will likely end up with somewhere between 25,000 and 50,000 entries.

That would result in a rake between $30,000 and $105,000 — between 66 and 233 percent.

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The real issue with the Bitcoin Bowl

As crazy as that sounds, it’s a very small buy-in contest. Most participants probably don’t care about the fee. They see it as a fun way to spend $3 and perhaps win something they otherwise wouldn’t buy (in this case, bitcoin) if they get lucky.

Even if FanDuel makes a mint on this contest, I don’t expect them to proliferate. Contests like this are bad for the DFS ecosystem.

The Bitcoin Bowl will produce a small number of winners with prizes not easily converted into entries in future DFS contests.

Only four people out of the 25,000 to 50,000 will cash in this contest, with the prizes doled out as follows:

• 1st: 2 BTC
• 2nd: .5 BTC
• 3rd: .25 BTC
• 4th: .25 BTC

Further exacerbating the problem, FanDuel disallows players from entering contests with bitcoin. Therefore, the $45,000 of value these players win will leave the site and not be used to directly enter other contests.

Contests of this ilk are great marketing tools and have the added benefit of being highly profitable to the site. But they need to be used sparingly.