Outside The Lines investigates the implosion of daily fantasy sports leaders DraftKings and FanDuel

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The implosion of the daily fantasy industry is a bro-classic tale of hubris, recklessness, political naïveté and a kill-or-be-killed culture.

There’s a game within the game that requires a different set of skills,” actor Edward Norton says in the voice-over as quick-cut video images show young men and women bathing a dog, jogging on the street, sweating in a sauna — all while staring, hyperfocused, into their smartphones.

“There’s no offseason. This is a play-as-much-as-you-want, whenever-you-want fantasy league. And we don’t just play — we are players. We train. And we win …”

Now those men and women are jumping, cheering, fist-pumping — each celebrating mammoth, seven-figure jackpots.

“This isn’t fantasy as usual. This is DraftKings. Welcome to the big time.”

At its peak last summer, a daily fantasy get-rich-now commercial aired every 90 seconds on television. Combined, industry leaders FanDuel and DraftKings plunged more than $750 million into TV commercials, radio spots, digital ads and other promotions. In the weeks leading up to the 2015 NFL season, the two startup companies spent more on advertising than the entire American beer industry.

Daily fantasy’s meteoric rise — breathtaking for its breakneck speed, avalanche of investors’ cash and ever-spiraling valuations — spurred the two companies’ endlessly annoying, record-shattering arms race for new customers and industry dominance. In only three years, DraftKings zoomed from an idea hatched by three buddies in a Boston barroom into a nearly $2 billion company, replete with comparisons to overnight Silicon Valley unicorns like Uber and Snapchat. FanDuel was right there too. The two companies processed a combined $3 billion in player-entry fees in 2015.

The companies were everywhere: logos emblazoned in ballparks, on NBA floors, on NHL boards and in ESPN studios. They became the darlings of the major American sports leagues, media companies, dozens of professional teams and a deep bench of investors — from Comcast and Google to private equity firms and a pair of the NFL’s most influential owners, Jerry Jones and Robert Kraft.

But as quickly as it boomed, the industry bottomed. One year after their headiest moments, FanDuel and DraftKings are still not profitable. Both privately held companies’ valuations have been sliced — by more than half, according to some estimates. The companies have hemorrhaged tens of millions of dollars in legal and lobbying expenses. (DraftKings’ attorneys fees once ran as high as $1 million per week.) And the fog bank of the industry’s uncertain future has made it nearly impossible for either company to raise new money. (FanDuel’s auditors have raised “significant doubts” about the company’s future if more states do not declare daily fantasy sports legal.) Three federal grand juries — in Boston, New York and Tampa, Florida — have alerted one or both companies that they are under criminal investigation. A merger — once unthinkable to many — is on the table.

It has been, by any measure, a spectacular fall.

The industry’s implosion began with a series of tactical mistakes made by a pair of bitterly hostile startup companies that all but dared federal and state authorities to shut down the sites over concerns the games constituted illegal gambling. Outside the Lines interviewed more than 50 company executives, current and former players, legislators, lobbyists, lawyers, investigators and industry consultants and found that the companies’ troubles were triggered, in part, by a toxic combination of young executives’ hubris and ignorance, reckless risk-taking and raw political naïveté. Infused with a false sense of security from FanDuel’s and DraftKings’ surging valuations and soaring revenues, the companies’ co-founders and CEOs — Nigel Eccles, 41, of FanDuel and Jason Robins, 35, of DraftKings — waged a self-destructive, kill-or-be-killed race toward industry supremacy and a life-changing payday that they now acknowledge was crazy for all of the cash it torched, the wrong messages it sent and the legal and media tsunami it unleashed.

For years, the two companies’ leaders had been warned by investors, lobbyists, consultants and even some players about a coming day of reckoning. Yet they relentlessly promoted their games as a means to get rich quick when they knew only a tiny percentage of their customers were winning more often than losing. They failed to aggressively move against big-bankrolled players who dominated newer players, sometimes with predatory behavior or technological advantages. And they allowed their own employees to play — and win millions — on their rivals’ sites, despite their having access to odds-improving proprietary data.

“This industry blew up so quickly — no one adequately planned or prepared for it,” says Gabriel Harber, 29, a former high-volume player at DraftKings and FanDuel. “[The executives] didn’t make the substantial investment on self-regulation and the regulatory side that was obviously needed. … Every PR person and lawyer should be fired. How could you let your client engage in this kind of crazy advertising if every legal loophole wasn’t closed? How stupid can you be?”

There is much more to this story,

Read More: OTL investigates the implosion of daily fantasy sports leaders DraftKings and FanDuel

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