Daily fantasy stock market contests are soon to be a real thing, and it doesn’t take a law degree in gambling or finance to know that the impending offering will cause much controversy.
Like daily fantasy sports (DFS) provided by industry leaders DraftKings and FanDuel, daily fantasy stock market contests (let’s hold off on the DFSM acronym) give players, or quasi-investors in this case, the ability to place wagers on their keen sense of predicting which stocks will perform best. Like daily fantasy football, the stock market contests will typically last one week.
Forcerank, the company in question, says its daily fantasy stock app will challenge contestants to rank a group of 10 stocks “based on their relative performance to one another” and their percentage increase or decrease on Wall Street. The more accurate your rankings, the more points you earn and the more money you receive.
Forcerank debuted on Thursday to a waitlist audience and is expected to rollout to the general public in the coming days.
Forcerank vs. DFS
Though the two formats have many similarities, fantasy stock market contests also have several key differences from daily fantasy sports. Instead of assembling a roster of athletes to create a fantasy sports team, customers on Forcerank simply rank the same 10 stocks in that week’s contest.
For instance, a $50 technology contest might have players rank Amazon, Apple, Google, Oracle, Facebook, Intel, Microsoft, Electronic Arts, Amaya, and Groupon. Each entrant positions the stocks 1-10.
Let’s say you place PokerStars owner Amaya at number one, and the company reports record earnings and the stock soars 25 percent and beats the nine others. In that case, you’d receive 100 points.
Forcerank Point Breakdown
Stock #1: 100 points
Stock #2: 50
Stock #3: 25
Stock #4: 12
Stock #5: 9
Stock #6: 6
Stock #7: 4
Stock #8: 2
Stock #9: 1
Stock #10: 0
Forcerank also shares commonalities with DFS in that its parent company Estimize argues the contests aren’t gambling and instead skill-based. “This is clearly a game of skill; we’ve proved that beyond a shadow of a doubt,” Estimize CEO Leigh Drogen told Fortune.
No Laughing Stock
Those weary of investing in the stock market think it’s as risky as conventional sports gambling, a notion nearly every educated investor discredits.
Gambling is a zero-sum game, meaning the loser gives his money to the winner. Investing in the stock market, while it doesn’t come with the instant possibility of doubling one’s money, also doesn’t too often come with the risk of completely losing the initial investment unless criminality interferes or the stock is worth pennies to begin with.
A $500 bet on the New England Patriots will leave you with $1,000 or $0 come Monday. A $500 purchase of five Apple shares is unlikely to leave you with nothing.
Since 1926, the S&P 500, the gold standard of the stock market, has provided a 73 percent return. You’ll need more than luck finding those yields at any casino.
That’s why DFS has caused so much controversy over the last 24 months. Sports betting is seen as a make-or-break endeavor, and while DFS incorporates skill, at least according to the operators, legal analysts, and politicians can’t get past the wagering aspect.
Stock market contests will understandably draw intense scrutiny from organizations and likely the Securities and Exchange Commission (SEC), but that isn’t to say the market and Forcerank will be deemed illegal.