If you watch any televised sports, then you’ve seen ads for the “daily fantasy sports” (DFS) web sites that have been blanketing the airwaves. In the wake of recent news reports that employees of daily fantasy football sites have won large payouts based on inside information not available to the public, Attorney General Eric Schneiderman has asked two leading companies, DraftKings and FanDuel, for a range of internal data and details on how they prevent fraud.
DFS sites charge a fee to and allow participants to build rosters of “fantasy” sports teams and compete against hundreds or thousands of other competitors based on the actual performance of players. The sites say that payouts can reach $2 million. The DFS industry, which is legal in New York and 44 other states, has seen massive growth in recent years. The two main companies have even entered into partnerships with some professional sports leagues, franchises and media companies.
The sites have until Oct. 15 to respond. Both of these web sites have since banned their employees from playing daily fantasy games for money and hired law firms to review their internal controls. But the Attorney General is asking whether the sites are capable of conducting their own internal investigations, and said that he plans to do so. He suggested that the site might be allowing what is essentially “insider trading.”