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. ... The two companies processed a combined $3 billion in player-entry fees in 2015. ... 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.
Salerno is up against many things — startup costs, consumer whims, a complicated and inefficient regulatory apparatus — but most immediately, he’s up against FanDuel and DraftKings, behemoths that have dominated the industry for the past half-dozen years. You know them because you’re one of the millions of customers who assemble football or baseball lineups on their sites, hoping to score payouts worth hundreds or thousands, maybe even millions. ... Or perhaps you’ve followed the regulatory crackdown that, since last October, has driven the industry to the brink of extinction. Like Uber, Lyft, and Airbnb, other self-described disruptors that operated in legal gray zones and got in trouble, daily fantasy sports companies are now at a major moment of reckoning. ... Salerno thinks he’s come up with a daily fantasy game that does right by everyone. In his model, customers wager in a style that resembles horse-race betting, one already legal in most of the country. If Salerno is successful, he’ll have not only staked out profitable territory in the high-risk, legally ambiguous, crowded, and very, very lucrative world of daily fantasy sports, he’ll have invented a fairer — and, crucially, more legal — way to play the game, showing two of the world’s hottest startups that it pays to play by the rules. ... He was among the first operators to allow people to place bets over the phone. In 1984, he co-developed hardware and software that let patrons trade their betting slips for computer-generated tickets and cashiers instantly look up every bet and payout; the first-of-its-kind system became a virtual monopoly across Vegas when Nevada required all race and sports books to be computerized. In 2002, Salerno developed one of the first self-service kiosks where gamblers could place sports bets 24 hours a day.