A version of this article previously appeared Forbes.
Fanstasy sports sites DraftKings’ and FanDuel’s popularity has spurred a new-breed of political betting sites. Unlike sites of the past that were deemed illegal, the current crop of election sites appear to well positioned to exploit the unprecedented focus Americans are applying to the 2016 election cycle.
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As discussed in Mini-ventures Build Entrepreneurial Muscle, I am an advocate of students starting side businesses while in college. I believe that the lessons learned, albeit on a small scale, have broad applicability to full-time ventures.
Thus, I was pleased when I learned that one of my students recently launched Fantasy Pollster. Although the startup is still nascent, it has the potential to grow rapidly, as it rides the momentum of one of the most contentious and closely watched elections of the past several decades. The following is an excerpt of our conversation.
John Greathouse: How did you and your Co-Founder Brent Kirkland get started?
Liam Cardenas: After doing a hackathon at Citrix, we realized that we had a similar vision. Shortly thereafter, we began developing apps and websites out of Brent’s garage. Late last year, we had the idea for Fantasy Pollster and have been working on it ever since.
Greathouse: You and Brent are currently third and fourth year Computer Science majors at UC Santa Barbara. How has the entrepreneurial program impacted you? Have you applied specific lessons that you learned in the classroom?
Cardenas: The entrepreneurial program is excellent! We’ve been applying a number of lessons learned so far. For instance, in the High Tech Sales class, we discussed the necessity of tracking ad performance. Since we have released our product, and are now looking to acquire new users, this has proven to be extremely valuable for getting a high return from our advertising expenditures.
Greathouse: You guys could have worked on a variety of ideas. What inspired you to focus your efforts on Fantasy Pollster?
Cardenas: As avid followers of politics, we wanted to create something that would have the predictive powers of old-time prediction markets, such as Intrade. After experiencing the thrill of daily fantasy sports, we realized that creating a fantasy site dedicated to political polling would provide a prediction market that is not only legal, but also much more fun and exciting than those before it.
Greathouse: You mentioned Intrade, which was shut down by the government in 2012. What mistakes did they make that you are avoiding?
Cardenas: Their approach was very different than ours. They created a futures exchange in which the contracts were based upon the outcome of political events. Once regulators started cracking down on the financial industry, they were no longer allowed to accept money from persons residing within the United States.
We, on the other hand, operate as a fantasy sports company, similar to DraftKings and FanDuel. Since we are not a futures exchange, we are not subject to the same financial regulations that forced Intrade to shut down. Although we have our own set of legal rules and regulations, we are allowed to operate nationally with restrictions in only a few states.
Greathouse: So the goal of Fantasy Pollster is to use the wisdom of the crowd to provide accurate predictions for political elections?
Cardenas: Yes, that is certainly one of our goals. However, we also want to make politics more engaging. The incentive for a voter to be well-informed is currently very low. It takes hours to research, yet the chance of an individual vote making a difference is practically zero. This is where our site comes in. If people are heavily invested in the outcome of an election, they will be more inclined to read the news and become politically active. Let’s face it, many people are more likely to research the features of their next smartphone than they are to research the positions of the presidential frontrunner. We want to give political research the same incentives as market research.
Greathouse: That sounds nice, but do you have any evidence to support the idea that people will be become more politically engaged after wagering on the outcome?
Cardenas: Right now we are trying to prove the concept. However, The Daily Show seems to think it will work. Roy Wood Jr., a correspondent on the show, did an excellent piece about election betting, and how it would increase political participation without the negative externalities associated with other types of gambling.
Greathouse: But I thought Fantasy Pollster wasn’t a gambling website?
Cardenas: Well, it isn’t. As I alluded to earlier, we are legally a “fantasy sports company.” While drafting the Unlawful Internet Gambling Enforcement Act of 2006, federal lawmakers intentionally carved out an exception for businesses like ours. Although this exception has been around for a while, we are the first people to apply it towards political elections.
In order to meet this exception, there are certain guidelines that make our games slightly different from those of traditional gambling websites. This is why we do not run into any of the legal issues faced by the gentleman in the Daily Show piece.
Greathouse: How difficult would it be for an existing site to change their designation? Do you think your real competition will come from new sites or existing ones like PredictIt?
Cardenas: PredictIt took the same legal approach as Intrade, except they obtained a letter of “No Action” from the CFTC. This significantly restricts what they can do. If they were to reclassify themselves as a fantasy sports company, they would essentially be starting from scratch. Since we are not bound by the same regulations, we can make games that are more fun, nuanced, and feature rich than they can (create).
We welcome competition from new sites, as it pushes us to create an even better product. Ultimately, we aim to generate accurate prediction data, increase political participation, and provide an entertaining experience for our users.
Greathouse: So, what is the current state of Fantasy Pollster? And where are you planning to go with it?
Cardenas: During the first week of March, we made our first official release. Our games are currently based on the outcomes of the Democratic and Republican primary elections. In the short term, we plan on releasing new types of games with more social features, such as playing with friends. In the long term, we will continue to innovate in the legal prediction market space, shifting our focus from the primaries, to the November elections.
Greathouse: Liam, congratulations to you for launching a real business while in school. I strongly encourage my students to take the plunge and start mini-businesses while they are in college. I am sure you will learn a great deal and you may end up creating a job for yourself upon graduation. Well done.
Cardenas: Thank you for the opportunity to spread the word about our startup.
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Image credit: Scott Olson/Getty Images