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More trouble for fantasy sports firms

FBI probes FanDuel and DraftKings as ‘insider trading’ row escalates

Lesley EcclesThe FBI is now investigating the “insider trading” scandal that has erupted around fantasy sports games firms FanDuel and DraftKings.

Agents within the Justice Department are said to looking at the legality of daily fantasy sites after an employee of DraftKings was reported to have used information to win a six-figure prize on FanDuel.

The investigation is primarily focused on DraftKings, for now, and on whether its employees shared inside information or took advantage of other users.

The FBI’s involvement is regarded as the most significant development in what is now see as an unfolding PR nightmare for the two billion-dollar “unicorn” start-ups which have grown rapidly in recent years on the back of the fantasy sports craze sweeping America.
The scandal began on 5 October when it was revealed that DraftKings employee, Ethan Haskell, entered the Sunday NFL Millions weekly contest on rival site FanDuel and won $350,000.
It was suggested Haskell had seen “ownership” data and used it to secure his winnings on the rival platform.
DraftKings has insisted throughout that this version of events is inaccurate and both companies deny any wrongdoing.

But the controversy has gripped the media in the US as critics claim fantasy sports games breach its strict prohibition of online gambling.

FanDuel, run by husband and wife Nigel and Lesley Eccles (pictured), is co-headquartered at Quartermile in Edinburgh. FanDuel and DraftKings have an estimated 95% share of the “daily fantasy” market, one part of the much larger industry of traditional season-long fantasy sports that media giants such as ESPN and Yahoo have offered for some time.

Despite their denials, DraftKings, FanDuel, and Yahoo – a new entrant to daily fantasy this football – have banned their employees from playing on any daily fantasy sites.

The scandal has attracted new scrutiny from regulators and is the subject of a lawsuit. One Congressman has called for an inquiry into the legitimacy of the games.

Federal law states that fantasy games are permitted under the 2006 Unlawful Internet Gambling Enforcement Act, which made online poker illegal but not fantasy sports games. DraftKings and FanDuel claim they fall under the category of “games of skill”.

However,  hostility in some parts of the country means neither company operates in five states.

 

 

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