Flag for Illegal formation?

Last week, a content manager at DraftKings admitted to using insider data to win $350,000 in Week-3 NFL action at rival daily fantasy sports site FanDuel. A spokesperson for DraftKings told the New York Times that employees of both companies had won big jackpots, playing other daily fantasy sites as well. By late Monday (October 5), both DraftKings and FanDuel temporarily banned their employees from playing games at any other fantasy site.

The emerging scandal also prompted both fantasy sports companies to release a joint statement Monday to the Times, saying, "nothing is more important" than the "integrity of the games we offer."

"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 continued. "Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it."

This episode is only likely to raise questions about data that's accessible to employees at these companies and why the multi-billion dollar industry of fantasy sports remains unregulated. In addition, politicians can possibly use this as leverage to try to regulate the booming market. Just last month, Energy and Commerce Ranking Member Frank Pallone Jr. (D-New Jersey) requested that his congressional committee reviews the legal status of fantasy sports and sports betting.

DraftKings and FanDuel haved deluged NFL games with advertising this season, with each daily fantasy sports site offering millions in weekly prize money. This scandal begs to know what information did the DraftKings employee have access to? Was it data showing which players most fantasy owners were betting on or something even more telling?

Whatever it was, this is a serious issue.

"It is absolutely akin to insider trading," Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff in Fort Lauderdale, told the Times about employees at fantasy sites using such private data. "It gives that person a distinct edge in a contest."

He added: "The single greatest threat to the daily fantasy sports industry is the misuse of insider information. It could imperil this nascent industry unless real, immediate and meaningful safeguards are put in place. If the industry is unwilling to undertake these reforms voluntarily, it will be imposed on them involuntarily as part of a regulatory framework."

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