DraftKings 'Insider Trading' Scandal Profits Off FanDuel3 years ago
An ‘insider trading’ scandal has exploded in the world of Daily Fantasy Sports (DFS) this week after an employee of DraftKings allegedly used sensitive information to win $350,000 on the rival FanDuel site.
Ethan Haskell, who works as a ‘mid-level content manager’ for DraftKings, apparently released data on the NFL which was not available to the general public, forcing both companies to release statements defending the integrity of their operations.
However, industry experts have been quick to pillory the major players in DFS, with accusations of insider trading and calls for regulation of the nascent industry.
It is absolutely akin to insider trading
Said Daniel Wallach. Speaking about the emerging scandal to The New York Times, the sports and gambling lawyer for Fort Lauderdale firm Becker & Poliakoff explained, Q“It gives that person a distinct edge in a contest.”;
A DraftKings spokeswoman claimed that the employee had ‘simply made a mistake’ and that the company ‘was certain he did not use the information improperly’, but both DraftKings and FanDuel have now temporarily barred employees from using any of the DFS sites. They were already barred from betting on their own sites.
Daily Fantasy Sports Report co-founder, Ben Brown, first discovered Haskell’s breach and also claimed that Matthew Boccio - a FanDuel worker ‘with access to its internal data’ - had played DFS on DraftKings, a fact which a FanDuel spokeswoman confirmed.
Haskell’s specific actions – releasing information ‘which showed which particular players were most used in all line-ups submitted to the Millionaire Maker contests’, prompted Wallach to comment,
“The single greatest threat to the daily fantasy sports industry is the misuse of insider information. If the industry is unwilling to undertake these reforms voluntarily, it will be imposed on them involuntarily as part of a regulatory framework.”
As most people will be aware, the DFS market is not covered by the 2006 UIGEA Act which decimated online poker for many years, and continues to have a serious effect on the game.
As PokerTube reported yesterday on the DFS market:
The reason that these online fantasy sports websites are able to rake in cash hand over fist is because of a questionably fortunate loophole in the ever frustrating Unlawful Internet Gambling Enforcement Act of 2006.
DFS – unlike poker - has been designated as a game of skill, rather than chance, and therefore has avoided the regulation and outright banning in all but 5 states in the US, but episodes such as this week’s scandal may have a serious effect on this legal standing.
The joint statement released yesterday stated that,
“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.”
Neither DraftKings nor FanDuel would be drawn on the details of their policies on game integrity, this despite the fact that both companies admitted that employees had won several big jackpots at rival DFS sites. Chris Grove, analyst and editor of LegalSportsReport was prompted to ask,
“Is there any internal control? Any audit process? The inability of the industry to produce a clear and compelling answer to these questions to anyone’s satisfaction is why it needs to be regulated.”
The difficulty in self-regulating DFS comes from the ‘cross-over’ of employee and player in the blossoming fantasy league market.
“The nature of the industry is so specialized and so new that, at the speed which they grew, they relied heavily on the player population.”
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