It was only a matter of time before the meteoric rise of daily fantasy sites like DraftKings and FanDuel suffered a setback, but few thought it would be something of this magnitude.
On Monday (Oct. 5), The New York Times published a report indicating that Ethan Haskell, a mid-level content manager at DraftKings, had accidentally released information on roster selections among the community’s users ahead of last week’s NFL football matches. This information is usually released when all rosters lock at kickoff of the first game of the day, but Haskell’s leak came before the day’s events had begun.
Moreover, Haskell then went on to win $350,000 by entering a contest at FanDuel, DraftKings’ primary and only competitor in the daily fantasy sports industry.
ESPN reported that it’s more than common for the top winners on each site to be employees of the other. This, Daniel Wallach, a sports and gambling lawyer with the Florida-based law firm Becker & Poliakoff told The NYT, is a clear example of illicit practices that beg for regulatory intervention.
“The single greatest threat to the daily fantasy sports industry is the misuse of insider information,” Wallach said. “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.”
Both companies issued statements assuring users that their employees are monitored by internal fraud checks and no insider information was used by Haskell to win his $350,000. Nonetheless, DraftKings and FanDuel announced that its employees were banned from participating in daily fantasy sports contests until further notice.
“There are questions the industry cannot provide a satisfactory answer to,” Chris Grove, founder of Legal Sports Report, told ESPN. “They can’t tell you who has access to what data and what controls they have in place to ensure data isn’t abused. Even if they did tell you, consumers wouldn’t find the answers totally satisfactory. That’s a recipe for regulatory intervention.”
DraftKings and FanDuel started the NFL season off with a media blitz, but if the daily fantasy sports industry can’t deal with its biggest crisis yet, the government might do it for them.