Insider betting concerns surrounding popular and unregulated daily fantasy sports sites have spurred an inquiry from the New York attorney general’s office.
Attorney General Eric Schneiderman announced Tuesday the investigation will focus on the two major fantasy sports sites DraftKings and FanDuel and employees who won payouts on other sites and had access to inside information.
News of the inquiry follows a recent scandal where questions were raised regarding whether employees at the two multi-billion dollar companies used proprietary data to play games on other sites, and may have won hundreds of thousands of dollars as a result. Employees were able to see which players were most commonly picked to be on fantasy teams and instead pick lesser chosen ones, which increased their chances of winning.
FanDuel confirmed to ESPN Tuesday that Draft King employees won about $10 million on its site. DraftKings also defended itself saying that few can access to ownership data, and only those who need it to perform their job duties.
Both companies have temporarily banned employees from betting money on games, and forbidden employees from playing any daily fantasy games on any site. Moreover, DraftKings CEO Jason Robins told Fox Business News Wednesday the company was bringing in a “third party to come in and do a full audit of our procedures, make sure that if there’s any places that we can get better that we do.” Robins further insisted audit plans were underway before the insider betting news broke.
The questionable legality of these sites has caused some of FanDuel’s and DraftKings’ brand sponsors to chill their relationships, slowing down the pace of more than $101 million dollars in TV ads a month. ESPN also pulled individual segments of its “Outside the Lines” show sponsored by DraftKings.
Sports leagues are also in bed with the daily fantasy sports world. The MLB owns a sponsorship stake in DraftKings and prohibits players from participating on the site. The NFL has a three-year partnership agreement with DraftKings for its International Series in Britain, and sponsorship deals with 12 teams.
The daily fantasy sports sites have been repeatedly criticized for being unregulated and facilitating gambling addictions despite the companies’ claims to the contrary. Contestants pay entry fees with hopes of landing million-dollar pots but, as ThinkProgress previously reported, can often be left dismayed with debt and some with a gambling addiction.
But daily online fantasy sports playing isn’t considered gambling, a claim to which sports leagues have traditionally adhered. But their involvement has also provided grounds for more investigations and possibly more regulation under existing gambling and sports anti-trust laws. And to help kick that off, the Federal Trade Commission has been looped in after two congressmen — Sen. Robert Menendez (D-NJ) and Rep. Frank Pallone (D-NJ) — wrote the agency chair enumerating concerns of “insider trading” among online fantasy sports site employees.
Clarification: This piece originally referred to the attorney general’s inquiry as a “federal” one. The story has been updated.