With a major scandal brewing, fantasy sites DraftKings and FanDuel instituted new policies banning their employees from playing fantasy games for money while a state Attorney General launched an investigation into the companies and ESPN suspended branded news segments featuring DraftKings from the sports network.
In late September, news reports revealed that employees at the two companies regularly placed bets on each other’s websites. DraftKings content manager Ethan Haskell bet $25 on FanDuel and walked away with $350,000, allegedly by using data about which players were the most selected for lineups submitted on the DraftKings site—information that is not generally released until the lineups for all games have been finalized.
The fantasy sites responded with a formal ban on employees playing on competitors’ websites. Many employees at both DraftKings and FanDuel—the two largest online sites for fantasy gaming—also play fantasy sports, particularly as the niche industry has exploded in recent years. “Effective immediately, DraftKings employees will be permanently prohibited from participation in any public daily fantasy games for money,” the company said in a statement. “We will also prohibit employees from any Daily Fantasy Sports contest operator from participating in games on DraftKings.”
ESPN released its own statement to announce that the company suspended certain DraftKings content. The sports network, which reached a $500 million advertising deal with the company earlier this year, said it pulled DraftKings “billboards and sponsorship out of news programming,” as part of “a standard procedure for us to pull these kind of sponsorships and integrations when we are covering significant news, to avoid any suggestion of influence on our coverage.”
In recent years, fantasy sports have grown from informal groups of sports fans to online sites devoted to playing games for high-stakes money, with major sites like Yahoo entering the business and with investments from professional teams (including the National Football League’s Dallas Cowboys owner Jerry Jones and owner of the New England Patriots Robert Kraft).
Fantasy sports are subject to an exemption as a “game of skill” under the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits online poker and sports betting, but are subject to state gambling laws. Betting on fantasy sports remains illegal in five states—Arizona, Iowa, Louisiana, Montana, and Washington—and a license must be obtained in Nevada.
That may change following the launch of an investigation by New York Attorney General Eric Schneiderman. The AG sent letters to both FanDuel and DraftKings requesting information such as the names and titles of employees who compile player data, set roster values, and aggregate the success of players on their sites. In addition, Schneiderman asked about data storage and security, as well as any policies in place on limiting winnings that can be claimed by employees, their friends, and relatives playing on the company’s site or rival platforms.
To read the AG’s letter to FanDuel, click here.
To read the letter to DraftKings, click here.
Why it matters: While fantasy league sponsors were subject to fallout from the revelations, it remains to be seen if the scandal impacts the bottom line of the multibillion-dollar industry.