The new year may not be such a fresh start for controversial fantasy sports sites FanDuel and DraftKings.
According to The Wall Street Journal, a lawsuit was filed last week by New York Attorney General Eric Schneiderman against the sites, demanding all winnings made in New York state be returned.
Officials confirmed that the lawsuit is not only seeking for users to be reimbursed for all money lost by using the two sites, but it also may require the sites to pay a fine of as much as $5,000 for each case.
Last year, the two sites racked up nearly $200 million in entry fees from almost 600,000 New York residents, WSJ said.
The meteoric rise of daily fantasy sites DraftKings and FanDuel suffered a massive setback last October when The New York Times published a report indicating that Ethan Haskell, a mid-level content manager at DraftKings, accidentally released information on roster selections among the community’s users ahead of the NFL football matches.
Haskell’s leak came out prior to when all rosters lock at kickoff of the first game of the day and allegedly led to him winning $350,000 by entering a contest at FanDuel, DraftKings’ primary and only competitor in the daily fantasy sports industry.
The “insider trading” scandal also shed light on the common practice of the top winners on each site being employees of the other.
This, Daniel Wallach, a sports and gambling lawyer with the Florida-based law firm Becker & Poliakoff told 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.”