Vault-Like Services Could Be Next Fantasy Sports Success Stories

Apr 20 2014, 10:54am CDT | by

Billions of dollars are being exchanged among fantasy sports participants, which has led to the rise of subsectors within the fantasy gaming industry.  The most well-known subsector is the rapidly rising daily fantasy gaming group of entrants, with companies like MGT Capital Investments, Inc., FanDuel and DraftKings fighting for supremacy and more recently threatening legal action to curb certain advertising techniques.  The fantasy gaming industry has also experienced the entry of insurance companies seeking to offer services that protect fantasy owners against catastrophic injuries to key pieces of their teams.  Finally, a vault-like subsector has developed, which seeks to serve as a sort of escrow for fantasy sports participants who no longer wish to use services such as PayPal to exchange fees and leave all the money in the hands of commissioners who lack the true capacity and wherewithal to keep the money in a trust account.

There are not many options when it comes to a fantasy-specific escrow to accept and hold entry fees and then disburse said fees to the winners at the conclusions of the games.  The first known entrant into this unique area is LeagueSafe, which was created in 2008 by current Fantasy Sports Trade Association President Paul Charchian.  The service holds users funds in a secure account until the end of a “fantasy season,” when the commissioner of the fantasy league then allocates the winnings.  The concept is not entirely novel; however, it is difficult to find many others who have attempted to duplicate or further develop the concept.

LeagueSafe’s main competitor appears to be a start-up called FanHold.¹  FanHold’s founder says that since FanHold’s launch, 98% of league members have paid requested league fees within days, resulting in league commissioners spending more time on strategy and less on follow-up and hassling participants to pay.

“I was tired of spending my time to collect money from friends and with Fanhold people can pay in seconds,” said Michael Bivens, CEO of Fanhold to FORBES.  ”The social aspect of the site is designed for our members to be able to chat with other league members and ultimately have fun connecting with people all over the nation within their league.”

Once a fantasy league is set up on the FanHold system, the league’s commissioner sends an e-mail to the active league members, who then create their usernames and passwords through a link provided in an automatically generated email.  The commissioner can choose the final date for league participants to sign up and make a payment in order to remain as active participants.  Providing the commissioner the flexibility to pick the end-date for participation and payment oftentimes creates a sense of urgency.  FanHold has also built social features into its service so that members can easily interact among each other prior to and during league play.

“Fanhold is an easy, secure way to hold and collect money for our many sports tournaments we do monthly,” added the owner of TerezOwens.com, a popular sports gossip and sports celebrity rumors website.  “It has even saved a couple relationships in our fantasy football league . . . no more trying to collect from buddies.”

An unfortunate common theme with fantasy sports is that arbitrarily instituted commissioners are deterred from desiring to lead fantasy leagues based on the difficulty of collecting and disbursing league-related fees.  Further, fantasy players are often slow to throw money into the pot, especially if no one else is ponying up the requisite amount of cash.  Enter vault-like services such as LeagueSafe and FanHold — a commissioner’s dream concerning fantasy sports, March Madness pools or any other contest that benefits from a viable payment solution.  An escrow may be necessary in an industry where billions of dollars are at stake.  Said escrows stand to carve out their piece of the fantasy sports pie if their services are effective and trustworthy.

¹ Disclosure: The author has served as a consultant for FanHold and has a small ownership interest in the company.

Want to learn more about the business of sports? Order my book How to Play the Game and follow me on Twitter.

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