Things are about to get really serious in the land of fantasy sports. Specifically at the multi-billion dollar industry known as Fan Duel and Draft Kings. On Monday, the two major fantasy sports companies were prompted to release a statement defending their businesses’ integrity after allegations of insider trading where employees of the companies were using information not accessible to the public.
The story broke after one of the employees of Draft Kings admitted last week that to inadvertently releasing data before the start of Week 3 of the 2015 NFL season. The employee, that same week won $350,000 at a rival site, Fan Duel.
The two rival companies released this joint statement regarding the manner:
Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. 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.
However, we continue to review our internal controls to ensure they are as strong as they can be. We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love.
How does this give an advantage to the player? It’s simple, winning a contest like “Millionaire Maker” which has hundreds of thousands of contestants, is less about buying up the best players than about find market inefficiencies and selecting players who will help the fewest amount of our competitors while running cheap relative to their production. So, when you select your lineup, you have to try to determine both the bargain value and how under-the-radar your lineup will be.
Now if you have this information ahead of time as some of the DraftKings reportedly did or do, you have a massive advantage over your competitors. Now the DraftKings employee who had possession of this information went and played a similar contest at FanDuel, the rival company and took second place and $350,000 from a $25 bet. DraftKings employees are prohibited form playing their own daily fantasy games, but are allowed to play freely on other sites. This is a significant issue because both sites both sites reportedly have similar game structure and lineup data.
Now there isn’t any news of this is something that could be what’s called “insider trading” but it is a sketchy situation given the advantages it gives to someone in a skill-based competition as Daily Fantasy Sports are classified as by the Fantasy Sports Trade Association (FTSA).