‘FanDuel for stocks’ app draws ire of securities commission

A mobile phone app that offers “fantasy stock” contests is facing a $50,000 penalty on charges of illegally offering security-based swaps.

The Forcerank app was described by Fortune as “the stock market version of fantasy sports sites FanDuel and DraftKings” when it was launched in March. According to start-up Estimize, the app allows players to rank a group of 10 stocks or exchange traded funds based on expected performance over the upcoming week.

Using the app, players get to win points for each instrument based on the accuracy of their prediction, and the players with the most aggregate points receive cash prizes at the end of the competition. Forcerank, in turn, keeps 10 percent of the entry fees and obtains “a data set about market expectations,” which it hopes to sell to hedge funds and other investors.

The U.S. Securities and Exchange Commission, however, found that the games violated provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, whose goal is to limit the sale of security-based swaps to the highest level of regulation as well as ensure that information about a swap offering is fully transparent to retail investors.