In what will no doubt be considered a watershed moment for the unregulated online multibillion-dollar daily fantasy sports (DFS) industry, employees from DraftKings and FanDuel have been barred from entering DFS contests, and while media partner ESPN has attempted to downplay its “BFF” status with DraftKings, Major League Baseball took more of a wide-eyed stance in reaction to the series of events that began just days ago.
The avalanche of events began on Monday when the DFS industry leaders defended the integrity of their businesses in a statement in reaction to allegations that their employees were benefitting from what has been likened to insider trading, by using information such as ownership levels which is not generally available to the public, and placing bets. Followed by a New York Times report, ‘Scandal Erupts in Unregulated World of Fantasy Sports,’ announcing the companies change in policy after receiving negative reaction from their less than exact joint statement regarding the allegations. The New York Time’s piece then followed by a statement released by the Fantasy Sports Trade Association (FSTA) later on Monday saying member companies must “restrict employee access to and use of competitive data for play on other sites,” per charter requirements, according to a CalvinAyre report.
According to the New York Times report, the industry leaders said, “both companies have strong policies in place to ensure that employees do not misuse any information at their disposal,” and the FSTA, which both DraftKings and FanDuel CEO’s are board members, insisted that no evidence existed that the rule had been broken. However, the FSTA did say having been convinced by the inadvertent release of sensitive in-house data by DraftKings’ written content manager Ethan Haskell, and his subsequent $350,000 win on industry rival FanDuel, the companies needed to bar its employees from participating in those contests while the DFS industry worked to develop a more detailed policy.
So far fallout from the possibility that employees of DFS companies could take unfair advantage of their access to inside knowledge, and the current scandal that was referred to as “fantasy-gate” by CNBC on Tuesday, includes ESPN stopping in-show ads from DraftKings within its programming. DraftKings spent $11.8 million, the bulk of their September investment on ESPN which they have a nine-figure advertising deal with. Also prompting New Jersey Congressman Rep. Frank Pallone, who last month called for a federal probe into the DFS industry, to send a letter to the Federal Trade Commission (FTC) on Tuesday saying that recent events have raised “serious questions about the integrity of these online fantasy sports websites.”
Also inserting itself into the fray is Canada’s Amaya Gaming, which recently entered the DFS industry with its August acquisition of Victiv (rebranded StarDraft), calling for “state regulators to adopt tougher restrictions that safeguard players and institute controls to ensure all operators are held to a high standard of consumer protection and business integrity.”
Meanwhile, according to the New York Times, an inquiry into the insider trading melee has been opened by New York Attorney General Eric Schneiderman who also sent a letter to the two companies requesting they submit key information related to the situation by October 15.