By Lance Rinker
DraftKings and FanDuel have been battling it out for fantasy sports supremacy for years now, but now both are battling possible government regulation.
From the beginning of each company’s existence, they maintained a model of ‘self-regulation’ meant to prevent employees from using information not available to the public to game the system in a sense. That model of ‘self-regulation’ is likely gone for good as the New York Times revealed that a DraftKings’ employee, Ethan Haskell, admitted to “inadvertently releasing data” and winning $350,000 on FanDuel.
Maybe you’re wondering why this is such a big deal. You just want to keep on being able to cash in on your sports knowledge. Think of it in terms of insider trading. The fact that this DraftKings’ employee has access to information that shows what players are being chosen and at what rate would provide the opportunity to gain a decided edge in fantasy contests.
“It is absolutely akin to insider trading,” said Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff told the New York Times. “It gives that person a distinct edge in a contest.”
Knowledge of the type of information daily fantasy sports betting sites deal in every day could be used by perceptive players to gain an advantage over others, especially when there is real money on the line. As of now it’s all speculation regarding whether Haskell intentionally used the information to gain an edge on rival site FanDuel, but it still doesn’t look good even if he didn’t. Between the timing of the leak of information, Haskell’s winnings, and researchers and journalists of the daily fantasy sports industry saying studies show he had a decided advantage – a fear is gripping the young industry that players aren’t being given a fair shake when they put their money on the line.
Simply put – early access to the type of information employees of these sites have, coupled with using it to create their own lineups is a serious threat to the integrity of daily fantasy sports.
Daily fantasy sports already are difficult to win. If there is anyone misusing insider information at any company offering consumers a way to bet on their skill at constructing a winning fantasy lineup, it only adds to the difficulty level.
“This is about statistics and probability and trend analysis and patterns,” said Seth Young, chief operating officer of Star Fantasy Leagues, a smaller daily fantasy sports site. “But it’s also about feel – who you want to pick, who you want to root for. You can play the game effectively if you’re just a huge fan, and you know everything there is to know about the sport.”
A spokeswoman for DraftKings said Haskell mistakenly released the information but the company is absolutely certain he did not use it improperly. Again, regardless of intention, the information daily fantasy sports site employees have access to provide them with advantages the rest of us don’t currently enjoy and it costs us money. How large of an advantage it provides is unknown, but industry experts agree there is an advantage and it does make a difference.
To their credit, FanDuel and DraftKings have proactively addressed the situation and have not shied away from answering questions on the matter. The two companies issued a joint statement to address the claims that their employees are using insider information.
Regarding the potential for fraud, the statement says:
Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.
The statement also notes that the companies aim to review internal policies and “work with the entire fantasy sports industry” on the issue in question.
What each company has also done is permanently ban their employees from playing daily fantasy games for money, on any site. They have also banned their employees from any other daily fantasy sports sites from participating on their platforms. This is all good and well when it comes to saying the right things and offering up quality lip service. How well can this even be monitored or regulated though? No specific plans for doing so have been offered up as of yet.
I wouldn’t go so far as to say FanDuel or DraftKings were doing enough of their own self-regulating to prevent this sort of thing, or to prevent it from ever happening again. They are doing plenty to save face and attempt to avoid full-on federal regulation like casinos currently ‘enjoy.’
FanDuel asked a former federal judge to evaluate its internal controls and practices. Granted, they also contracted a law firm to give them ongoing advice internally – likely meant to ensure they continue to do and say all the right things publicly. DraftKings took things just a tiny step further by contracting a legal team to conduct an internal investigation as well, except they plan to release the findings once the probe wraps up.
Industry insiders are unsure whether the industry can successfully self-regulate, though it’s apparent it can’t well enough to avoid major controversy. Some say it can self-regulate and this controversy is just a small bump in the road. Others aren’t so sure and look to what happened with online poker and casinos that were accused of stealing millions of dollars from players several years ago.
It’s clear something should be done, but players and the companies themselves hope any new rules made by outsiders who don’t understand the industry on any level and are unlikely to have a firm grasp on what actually did happen don’t make rules that negatively impact the industry instead of moving it forward in a progressive and responsible manner.