If fans of online gambling and daily fantasy sports (DFS) hoped that news of the recent “insider trading” scandal would stay contained to niche industry news sites and message boards, they are now sorely disappointed. Mainstream news sites have now caught wind of what has been going on and have jumped on the situation. Even my wife asked me if I had heard about it and she only knows about fantasy sports when I bother her with, “Man, if Andrew Luck didn’t suck so bad, I would’ve had a chance to win a lot of money,” stories.
But it gets worse for DFS fans (or better if you think this can lead to something positive). Yesterday, New York Attorney General Eric Schneiderman launched an inquiry into both Boston-based DraftKings and New York-based FanDuel to determine if there was truly any wrongdoing or if it was an honest slip that looks worse than it is.
In two separate, yet almost identical letters, Division of Economic Justice Internet Bureau Chief Kathleen McGee wrote that the allegations of a potential advantage given to DraftKings written content manager Ethan Haskell from access to player usage data “raise legal questions relating to the fairness, transparency, and security of [the site receiving the letter] and the reliability of representations your company has made to customers.”
The letter then goes on to ask nine questions, requesting answers by October 15th. Question one requests the names of all employees with access athlete statistical data, pricing, and ownership percentages, as well as fantasy player data. The next two questions ask where this data is stored and how access to it is limited, if at all. Question four requests copies of the company’s employee handbook and any sort of written policies regarding use of company data or participation in fantasy sports.
Questions five through seven asks for further information about various company policies including rules against employees (or their friends and family) using inside fantasy information to which they may have access, rules about playing on other fantasy sites, and rules regarding possible limits on fantasy winnings.
Questions eight and nine ask the companies to describe, in detail, what exactly happened with Haskell, when they learned about it, and what measures were taken to investigate the situation. FanDuel’s questions differed slightly here, as they also included an inquiry into Matthew Boccio, FanDuel’s Product Operations Manager, who has been a top winner in DraftKings contests.
In a radio interview Tuesday, Attorney General Schneiderman said, “It’s something we’re taking a look at — fraud is fraud,” Mr. Schneiderman said in a radio interview early Tuesday before the inquiry was announced. “And, consumers of any product, whether you want to buy a car, participate in fantasy football, our laws are very strong in New York and other states that you can’t commit fraud.”
Prior to the AG’s letters of inquiry being issued, DraftKings and FanDuel decided to prohibit their employees from playing for money on each other’s sites.
DraftKings also released a statement on Monday saying that the company conducted an investigation and found no wrongdoing. The statement read, in part:
We want to set the record straight. For the last several days, DraftKings has been conducting a thorough investigation, including examining records of internal communications and access to our database, interviewing our employees, and sharing information regarding the incident with FanDuel. The evidence clearly shows that the employee in question did not receive the data on player utilization until 1:40 p.m. ET on Sunday, September 27. Lineups on FanDuel locked at 1:00 p.m. that day, at which point this employee (along with every other person playing in a FanDuel contest) could no longer edit his player selections. This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup.
