Sports

Major Scandal Rocks DraftKings And FanDuel

CREDIT: Screenshot/Composite

FanDuel and DraftKings, the biggest players in the unregulated, multi-billion dollar daily fantasy sports industry, are facing a major scandal. DraftKings has acknowledged that confidential data was leaked by an employee. The same employee was able to win $350,000 that week at rival FanDuel.

The information at issue “showed the prevalence of particular players across all submitted lineups” for DraftKings’ biggest game, Millionaire Maker. This information is not available to the public and provides “a massive edge over players lacking such data.”

The reason why the information is so valuable is that “[b]ecause of the massive number of entries in the biggest contests at DraftKings and FanDuel — hundreds of thousands — it’s usually difficult to win a contest with a lot of players that are commonly owned.” Knowing who other players picked allows you to pick less popular players with high upside, giving you the greatest chance of success.

In a joint statement, DraftKings and FanDuel obliquely acknowledged the controversy but denied any “misuse” of insider data. They promised only to “review our internal controls.”

Chris Grove, who first broke the story on Legal Sports Report, blasted the companies’ response, which he said did not provide any concrete details on the most important issues. Specifically the companies are not saying how many employees have access to insider data, how often the data is queried or if there are logs of such queries.

Many of the biggest players in these games apparently work inside rival companies. An anonymous insider speaking to Grove said “a significant number of the whales at the top DFS sites are employees – often executives – of other sites.” A whale is a player who bets a large amount of money.

The industry is completely unregulated and there is no oversight over the companies’ business practices.

ThinkProgress took a deep look at the daily fantasy sports industry in May and reported on the issues with self-regulation, integrity and security:

While no government agencies appear to be regulating this new ecosystem on a national level, [Fantasy Sports Trade Association’s Paul] Charchian said fantasy sports is a “a self-regulating industry” with a voluntary “code of conduct.” The rules for FSTA members, which appear as the “Paid Entry Contest Operator Charter” on the group’s website, are meant as guidance for daily and traditional fantasy sports sites. Violation can result in cancelled membership.

But Charchian acknowledged that there are no industry norms or standards for how to protect the security of the sites or the integrity of the games: “Every company’s technology is different, we don’t have specific recommendations for technology solutions.”

A bold, friendly badge on DraftKings’ front page claims that the site is 100% safe and secure.

But like any site or game, there are serious potential concerns. And experts agree that in this unregulated wild west, it is hard to evaluate how likely these sites are to fall victim to hacking, cheating, spoofing, and improper use by those who are under age or in states where daily fantasy games may be explicitly banned.

DraftKings and FanDuel, which have partnerships with major professional sports leagues, have spent $101 million on TV ads in the last few weeks trying lure in new players.

Some current and former lawmakers believe the games may be illegal.