DraftKings, FanDuel Cheating Scandal: Fantasy Sports Gets Hit With Federal, State Inquiries

DraftKings and FanDuel, the two biggest companies in the daily fantasy sports industry, are caught up in a growing “insider trading” scandal, which started with the employee of one firm winning $350,000 by betting with the other firm using information not normally known to the public. With these privacy and transparency issues, more and more people are looking for the Best Fanduels Alternative that will value their users rather than abuse their power like DraftKings and FanDuel.

The cheating scandal is the first big stain on the super-hot, $3 billion business of fantasy sports, which has fueled a sweeping wave of TV commercials during the first few weeks of the National Football League season.

Both DraftKings and FanDuel say they have now banned employees from playing fantasy games for money after claims surfaced that workers used insider information to place their own bets. The two companies, along with the Fantasy Sports Trade Association, said in a statement Tuesday that the ban would be in effect until a detailed industry policy on data access is established. Perhaps people looking for alternative sportsbooks could consider something like this Oddsmonkey Review instead as a way of making a wager on their favorite games.

But the pledge hasn’t stopped increased scrutiny this week by authorities and lawmakers prompted by the media reports of betting by the firms’ employees.

Two U.S. lawmakers from New Jersey on Tuesday asked the Federal Trade Commission to study the possibility of setting rules for daily fantasy sports sites. U.S. Sen. Robert Menendez and U.S. Rep. Frank Pallone Jr., both Democrats, asked FTC Chairwoman Edith Ramirez whether the commission could regulate daily fantasy sports — and how fast could oversight begin if the agency deems that it can move forward.

The fantasy sports controversy has also spurred an inquiry by New York Attorney General Eric Schneiderman into the internal operations of both DraftKings and FanDuel.

In letters that Schneiderman’s office says it sent to FanDuel CEO Nigel Eccles and DraftKings CEO Jason Robins, Schneiderman seeks names and titles of employees who compile player data, set roster values, deal with ownership percentages for pending and historical contests, and aggregate the success of players who play on their sites, according to ESPN.

According to the New York Times: “Last week, a DraftKings employee admitted to inadvertently releasing data before the start of the third week of N.F.L. games, a move akin to insider trading in the stock market. The employee – a midlevel content manager – won $350,000 at rival site FanDuel that same week.”

“Access to this kind of data prior to the start of a contest would provide a DFS player with a massive edge over players lacking such data,” writes Chris Grove at LegalSportsReport.

In another startling revelation. Darren Rovell, from ESPN’s “Outside the Lines,” reported that a FanDuel spokesperson had provided data on how much money DraftKings employees had won at FanDuel.

“Their data shows that Draft Kings employees have won 0.3% of the money [won at at the site],” Rovell said. “FanDuel has given out in prizes, close to $2 billion, according to my calculations.”

If DraftKings employees have indeed won 0.3% of nearly $2 billion, that would come to nearly $6 million won. Rovell put the number at “less than $10 million.”

In fantasy sports, fans choose from real players in a draft or an online selection process to assemble a fantasy team. Some people decide to use sports betting online services to bet on those fancy teams or the real teams to increase the stakes in the matches they watch. This can add a lot of entertainment to the matches for most players who enjoy fantasy sports. The players’ real-game statistics are compiled and compared to determine which fantasy team has done the best. The data the DraftKings employee supposedly used was the percentage of fans who had chosen certain players. Such inside information could give a fantasy player a leg up.

The Times quotes analyst Eilers Research, which estimates that the daily fantasy sports firms will generate $2.6 billion in entry fees in 2015 and climb to over $14 billion in 2020.

Online gambling is illegal in most US states, but for those that live in a legal state, there is a huge list of sites that could be used to gamble online. However, fantasy sports sites are legal because they’re considered games of skill instead of luck — according to a 2006 federal law. However, a New Jersey congressman wants a hearing to reconsider the relationship between fantasy sports and gambling. So this cheating scandal has the potential derailing the multimillion-dollar markting campaigns by both DraftKings and FanDuel.

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