clock menu more-arrow no yes

Filed under:

What we know about the DraftKings and FanDuel data scandal so far

New, comments

Claims of illegal access to insider information for the financial benefit of employees has landed the daily fantasy sports giants in hot water.

Could this investigation see the Kings overthrown?
Could this investigation see the Kings overthrown?
Matthew Emmons-USA TODAY Sports

If you've watched a sporting event on television in the United States in the past 3 months, you've no doubt been exposed to countless advertisements for the daily fantasy sports games available through the DraftKings and FanDuel websites. The promise of winning huge sums of money by playing a game is something that obviously has mass appeal with American audiencesremember the frenzy to be a contestant on Who Wants to be a Millionaire?—and the opportunity to play without an audition has made the DFS sites exceptionally popular.

The funding for these ubiquitous commercials comes from the players who fail to make a profit, and while this fact has inevitably led to controversy around the contests' similarity to illegal sports betting, it's the players who are winning money that are making headlines at the moment.

The New York Attorney General's office sent letters to both FanDuel and DraftKings on Tuesday to notify them of an investigation into reports that some employees had gained an unfair advantage by having access to information not made available to the public, such as ownership percentages for specific players prior to roster deadlines. Both companies have agreed to cooperate with the investigation, but let's take a look at how it came to be in the first place:

What are the "reports" that led to the investigation?

Would you believe it? A social media gaffe is yet again at the heart of a whole lot of trouble for a major brand. A link was posted to the official DraftKings Twitter account with ownership percentage data for NFL players prior to the roster deadline for the Week 3 Millionaire Maker contest—one of the most popular and highly advertised contests on the site. As with everything else on the Internet, somebody (a man named Cal, in this case) discovered the mistake before it could be taken down and called attention to it on the popular fantasy sports forum, RotoGrinders.

DraftKings eventually got wind of their mistake, but their next move didn't help their cause. Ethan Haskell, a DraftKings employee, responded to the message on the RotoGrinders forum, stating the following:

I've fixed the error and we'll be putting checks in place to make sure it doesn't happen again. As Cal mentioned, I was the only person with this data and as a DK employee, am not allowed to play on site.

This assertion led to an in-depth article by Ben Brown of the website Daily Fantasy Sports Report, who called into question whether Haskell was in fact the only employee with access to the data, as well as the fact that the very same Ethan Haskell entered and won $350,000 in FanDuel's NFL Sunday Million competition the same weekend.

As the article outlines, with pricing and rules between DraftKings and FanDuel nearly identical, the connection between Haskell's access to the ownership data on DraftKings and his subsequent success in a substantially similar contest on FanDuel is an easy one to make. NY Attorney General Eric Schneiderman appears to have drawn the same conclusion from the piece, citing it in his list of inquiries to the DFS companies.

What exactly is under investigation?

Generally speaking, whether or not there is actually evidence of employees taking advantage of information not available to the public for their own profit on other daily fantasy sports websites. While employees of DraftKings and FanDuel are not allowed to participate in contests on their own site, as Haskell outlined, there were no provisions in place within the employee handbooks of either company for participating in contests on other DFS sites. Both companies have modified their rulings since the commencement of the investigation, banning their employees from taking part in contests on the others' site. Whether this ruling will continue to be enforced following the investigation remains to be seen.

More specifically, the Attorney General's office is looking into all employees who have access to, or job responsibilities related to, fantasy player information and data related to its contest participants; the details of how and where that data is stored; and the policies in place to prevent fraud from taking place internally and on other similar sites (DraftKings and FanDuel are the only sites targeted in this investigation, and have been identified as "two dominant players in a daily fantasy sports industry that is estimated to generate approximately $2.6 billion in entry fees in 2015").

The companies have until October 15 to submit detailed replies to each of the 9 inquiries outlined in the letter.

Will this affect my ability to play DFS contests?

At this point in time, it seems very unlikely that this investigation will lead to any immediate consequences for either DraftKings or FanDuel. One possible course of action, should the investigation lead to evidence of fraud or other illegal activity, would likely be sanctions, fines and/or stricter regulations of the policies of these companies. This specific investigation should not lead to daily fantasy sports being shelved in the United States, and even if DraftKings and FanDuel were affected, there are other DFS sites (such as MondoGoal and Yahoo!) not implicated in this investigation that could easily take their place for the time being.

As with any controversy, some sponsors have either spoken to their ignorance of the situation or made a move to distance themselves from the companies. While these sponsors include national organizations like Major League Baseball and ESPN, it's still unlikely that the bottom line for either DraftKings or FanDuel will be negatively affected at this point. The advertisements seem to be working perfectly, with hundreds of thousands of new users registered since the beginning of the NFL season.

The argument over whether participating in these contests constitutes gambling is much more likely to lead to changes in the DFS landscape, but for now you have no reason to worry about when you can build your next cash game lineup for either of the two biggest brands in the game.