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Scandal in the industry of fantasy sports

October 6, 2015

A scandal is touching the unregulated industry of fantasy sports in which players assemble their fantasy teams with real athletes. Earlier this week, DraftKings and FanDuel released statements defending their businesses’ integrity after what amounted to allegations of insider trading, that employees were placing bets using information not generally available to the public.

The joint statement stating that “nothing is more important than the integrity of the game”, was released after an employee of DraftKings admitted last week to inadvertently releasing data before the start of the third week of N.F.L. games. The employee won $350,000 at a rival site, FanDuel, that same week”. A spokesman for DraftKings acknowledged that employees of both companies had won big jackpots playing at other daily fantasy sites. Both companies temporarily barred their employees from playing games or taking part in tournaments at any other site; they already had prohibited their employees from playing on their own company sites.

“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,” the statement said. “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 industry has its roots in informal fantasy games that began years ago with groups of fans playing against one another for fun over the course of a season. They assembled hypothetical teams and scored points based on how players did in actual games. But in recent years, companies have set up online daily and weekly games based on a similar concept in which fans pay an entry fee to a website to play dozens if not hundreds of opponents, with prize pools that can pay $2 million to the winner. Critics have complained that the setup is hardly different from Las Vegas-style gambling that is normally banned in the sports world.

Already, there has been intensifying discussion on social media and among lawmakers over whether daily fantasy games are pushing the boundaries of an exemption in a 2006 federal law that has allowed them to operate. The law prohibited games like online poker but permitted fantasy play, deemed games of skill and not chance, under lobbying from professional sports leagues. The games are legal in all but five states. But because Congress did not foresee how fantasy sports would explode, one member, Representative Frank Pallone Jr., Democrat of New Jersey, recently requested a hearing to explore the relationship between fantasy sports and gambling. “I really think if they had to justify themselves at a hearing they wouldn’t be able to,” Mr. Pallone said in a recent interview.

The scandal has raised questions about who at daily fantasy companies has access to valuable data, such as which players a majority of the money is being bet on; how it is protected; and whether the industry can, or wants, to police itself.

Source New York Times


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