AlphaDraft explained the situation via email to its customers:
“Two years ago, we set out to combine esports with daily fantasy sports. In February 2015, our team launched AlphaDraft, bringing you daily and weekly fantasy esports contests. What started with only a few esports contests expanded along the way and we are very proud of the platform we built.
However, as we continue to evaluate the esports landscape, we are announcing today that we have made the difficult decision to stop offering fantasy esports contests on AlphaDraft as of Friday, October 21, at the conclusion of the League of Legends World Championship. You can continue to play contests until this time.”
It was around the time when DraftKings, the other DFS titan, expanded its business to fantasy esports.
A great start for the fantasy esportsbook
In early 2015, investor interest in the daily fantasy esports companies was big, with a lot of funding pouring into the hands of AlphaDraft and Vulcun.
Measuring success through the pace of customer acquisition, the industry looked very promising, as both companies were able to increase their user pools in a relatively short time.
On top of that, seeing DraftKings and FanDuel enter the field raised the potential exposure of the relatively young market.
Legal uncertainties present industry hurdles
Soon, legal issues created a difficult environment for operators to safely run their businesses.
Vulcun, the other major provider of fantasy esports, shut down its real-money operations in January of this year due to the legal landscape in the United States.
It kept offering fantasy esports contests based on its internal currency for a while, but that eventually ceased operations as well.
DraftKings moved into the market by offering sponsorships to multiple esports teams. Even though the venture into fantasy esports was promising, DraftKings later dropped sponsorships, which raised the question of whether its timing for entering the industry was right.
However, as of this moment, DraftKings’ esports services are still intact.
The challenging environment for fantasy esports betting
While many believe that the esports betting market looks more promising than ever, with the underlying esports industry still booming, the surrounding legal challenges make it hard to predict what will come next.
This holds for both the fantasy sports and esports wagering markets.
While it is clear that the legal environment is uncertain, it still does not stop corporate sponsorship money from flowing into the market. In addition, sport organizations from the traditional sports scene are showing increased interest in the industry.
Even though it might sometimes not be directly related to the fantasy or the esports betting markets, the growth of the esports industry itself should have positive effects on the accompanying betting market.
Until regulators provide a clear framework for rules, running a business in an uncertain environment will pose risks. Once the industry is stabilized, providers will certainly appear and reappear with new business ideas.
AlphaDraft is, for now, shutting down its services, saying it will “continue to evaluate the esports landscape.”