‘Insider’ scandal engulfs leading daily fantasy sports site

Daily fantasy sports market leaders DraftKings and FanDuel are trying to manage a growing row in social and international mainstream media over allegedly “insider” use of data by employees in order to gain monetary advantage.

The furore over the past 72 hours developed when a DraftKings manager, Ethan Haskell, “inadvertently” released what constitutes insider information on National Football League fantasy teams and subsequently placed winning bets on rival site FanDuel, earning $350,000.

The New York Times broke the mainstream news, noting that although DFS prizes can reach millions of dollars, the sector remains unregulated and has attracted political questions regarding its legality in gambling terms (DFS firms have steadfastly claimed that the vertical does not constitute gambling).

The newspaper said that the data released by Haskell showed what players were most used in line-ups submitted to the site’s Millionaire Maker contests. Normally that data is not released until the line-ups for all games are completed, and the information’s early release represents a major advantage for whoever has it.

DraftKings and FanDuel took the unusual step of issuing a joint statement which assured users on the integrity of their systems but acknowledged that “many” employees of daily fantasy companies were initially players and continue to compete on other sites. A moratorium on this practice has been imposed by both companies.

The companies claimed that they have policies in place to guarantee that employees do not misuse company information to which they have access, and that access is restricted to certain levels of employee.

“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers,” the statement declared. “Employees with access to this data are vigorously monitored by internal fraud control teams, and we have no evidence anyone misused it.”

The companies said they were reviewing their internal controls and would work with the fantasy sports industry on the issue.

However, a DraftKings spokeswoman said Haskell’s indiscretion had been inadvertent and a mistake, the NY Times reported, revealing that it had picked up on the story through the online media site Daily Fantasy Sports Report.

DraftKings and FanDuel have both been expanding rapidly in terms of player bases, promotions, events and business expansion, spending hundreds of millions of dollars on advertisements touting huge prizes that have now almost reached saturation point in the United States.

Politicians and industry observers have expressed concern over the phenomenal rise of the vertical and its unregulated and unsupervised nature, with some states calling for reviews on its legality .

The Associated Press news agency report on the matter emphasises that there is no evidence that Haskell used the information to finish in second place in the NFL Sunday Million contest run by rival company FanDuel. The contest, which cost $25 to enter, featured $5 million in cash winnings, including $1 million to the winner.

However, the agency points out: “But it is no secret in the daily fantasy industry that the kind of information the employee [Haskell] tweeted out could be used to draft fantasy teams that include players that aren’t in widespread use in any given contest. If those players perform well, the odds of the person holding them winning goes up dramatically.”

The DraftKings and FanDuel statement also emphasises that such evidence is not present.

Approached for comment on what policies and controls it has in place, DraftKings did not respond, but a spokeswoman for FanDuel said her company does not believe there was any attempt to manipulate its contest.

Respected industry journalist and researcher Chris Grove of Legal Sports Report commented that even the outside possibility of a rigged contest raises critical questions about the integrity of the daily fantasy industry.

“There are questions the industry cannot provide a satisfactory answer to,” Grove said. “They can’t tell you who has access to what data and what controls they have in place to ensure data isn’t abused. Even if they did tell you, consumers wouldn’t find the answers totally satisfactory. That’s a recipe for regulatory intervention.”

Joe Asher, who heads U.S. operations for the William Hill sports betting chain, asserted again that daily fantasy is gambling and should be regulated by the government, just as sports books are regulated in Nevada.

“I’m all for daily fantasy betting,” Asher said. “I think it should be legal, I think it should be regulated, and I think it should be taxed. But nobody is in favor of unregulated internet gambling and that is exactly what daily fantasy sports is.”

Related and similar