Fall-out on DraftKings scandal continues

The fall-out continued Tuesday in the DraftKings “insider” information furore (see previous reports) with the New York Attorney General, Eric Schneiderman demanding explanations and information, and other politicians getting involved.

Our readers will recall that Massachusetts Attorney General Maura Healey announced last week (before the current scandal erupted) that she was reviewing the legality of daily fantasy sports betting in her state.

Schneiderman has sent letters to both Fanduel and DraftKings demanding by October 15 explanations and information on staff with access to sensitive information, how it is guarded and other aspects of the business.

His department has begun an investigation into the case, in which it is alleged that a DraftKings employee may have used inside information to win $350,000 in a football DFS tournament at FanDuel.

In the letters the New York AG observes that the allegations raise legal questions about the fairness, transparency and security of the companies, and queries what policies prohibit or restrict employees and others associated with sensitive information from participating in DFS competitions.

DraftKings responded quickly to news of the letters, saying it will cooperate with the AG’s office on the issue.

Adding fuel to the fire, Nevada Senator Harry Reid – always ready to protect the sports betting market in his home state – issued a statement calling on Congress to examine fantasy-sports betting services and commenting on the DraftKings scandal.

“There’s absolutely scandalous conduct taking place through those programs, fantasy sports,” Reid told reporters. “I think it also should be a warning-shot to everybody that online gaming is a real scary thing and we ought to look at all of it.”

And across in New Jersey, Representatives Frank Pallone (who has already suggested a review in Congress of DFS) and Senator Bob Menendez, asked the Federal Trade Commission to look into the allegations against the DraftKings employee involved.

The House of Representatives could hold hearings this fall, said Pallone, who serves on the Republican-controlled Energy and Commerce Committee, which has confirmed it is considering the issue following Pallone’s earlier suggestions.

Meanwhile, DraftKings has drastically reduced its prolific advertising on the ESPN site following reports that ESPN would scale back on DraftKings sponsorship graphics and language within its programs.

The DFS company said that it had pulled all of its advertisements from the 24-hour sports network.

ESPN spokesman Paul Melvin said the network’s decision to scale back DraftKings publicity was motivated by a desire to avoid the appearance of a conflict of interest.

“It is a standard procedure for us pull these kind of sponsorships and integrations when we are covering breaking news,” Melvin said in a statement issued to USA Today. “We look to avoid any suggestion of influence on our coverage.”

The fast-moving political and enforcement events now taking place suggest that the legality of daily fantasy sports and whether it constitutes betting will soon be decided, along with restrictions on the presently unregulated and unsupervised nature of the vertical.

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