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DraftKings, FanDuel and the feds: The daily fantasy story so far
This season, if you're a sports fan or are even sports fan-adjacent, two words have become nearly inescapable: daily fantasy. The suddenly booming industry has steamrolled TV, radio and the internet with ads promising that playing this "game of skill" can turn your intimate knowledge of sports into big bucks. Its annoyingly bombastic ads alone are enough to make anyone skeptical, since even in this fantasy not everyone can wind up an instant million dollar winner. All of the publicity has worked in FanDuel and DraftKings' favor, making daily fantasy games more popular than ever. That is, until a leak that showed the possibility of insider trading sparked a backlash. Now daily fantasy has the full focus of powerful government figures who may decide if the games will continue.
DraftKings and FanDuel sue to stop New York Attorney General's ban
Following New York Attorney General Eric Schneiderman's request for daily fantasy sports sites DraftKings and FanDuel to stop operating in his state, the two sites filed a lawsuit against the AG. Filing a petition with the New York Supreme Court, both sites allege that Schneiderman's office illegally interfered with their business operations by threatening payment processing vendors if they didn't stop handling transactions for players in New York. The Attorney General also declared the two illegal gambling sites earlier this week, threatening to ban them if they didn't stop operations. The companies maintain that their version of fantasy sports do indeed require skill rather than luck, which separates them from regular ol' gambling.
FanDuel and DraftKings are getting shut down in New York too
The New York Times and ESPN are reporting that New York Attorney General Eric Schneiderman has followed his counterpart in Nevada by asking the two biggest daily fantasy sites to stop taking bets in his state. DraftKings and FanDuel have been struggling to escape a controversy that exploded when reports surfaced that employees were regularly playing, and winning, on the competing websites, and now are facing a future of tighter regulation. According to the letter Schneiderman has decided the games constitute illegal gambling under the laws of New York, and should be banned as games of chance. This is particularly complicated for FanDuel, which has its headquarters in New York. Update: DraftKings said in a statement to Engadget that "We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love." Meanwhile FanDuel says, "The game has been played -- legally -- in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal." You can read both statements -- along with a quote from AG Schniederman -- in full after the break.
Fantasy sports industry rushes into self-regulation
In the wake of the insider trading scandal surrounding DraftKings and FanDuel, the multi-billion dollar daily fantasy industry's created a self-governing agency dedicated to making sure affiliated companies stay on the up and up. The existing Fantasy Sports Trade Association is forming a separate organization to do so, dubbed the Fantasy Sports Control Agency that'll design a "strict, transparent and effective system of self-regulation" for the industry. That entails creating a set of ethical standards, enforcing penalties for outfits that don't comply with those standards and an auditing process for maintaining compliance. It's headed up by former Deputy United States Secretary of Labor Seth Harris whose background as a law professor and member of President Obama's cabinet should help him keep everything straight.
Nevada gaming board shuts down daily fantasy because it's gambling
While daily fantasy games (DraftKings, FanDuel and others like them) may have gotten a special exemption for online betting from Congress in 2006, today the Nevada Gaming Control Board decided they do constitute gambling, and shut down their operations (PDF) in the state. Daily fantasy games were already banned totally in some states (Arizona, Iowa, Louisiana, Montana and Washington), but the home of Las Vegas casino gaming is another matter entirely. This follows a tough couple of weeks for the multi-billion dollar industry which has come under scrutiny because so many employees of the two largest competing sites were playing and winning on each other's sites, with questions over whether they could possibly use insider information to get an edge. Both sites have since banned their employees from playing, but the controversy has not gone away.
DraftKings and FanDuel face questions about 'insider trading'
Massive ad campaigns have made the rise of daily fantasy hard to ignore, but maybe there's one thing that could put the brakes on the likes of FanDuel and DraftKings: scandal. The issue seems to have started with a forum thread on Rotogrinder calling out "Millionaire Maker" information posted early by a DraftKings employee. Usually, that info is not available until after games start because its impact on each football player's value could help someone set up their roster, and it's come under more scrutiny since that same employee won $350,000 in the same week on competing site FanDuel. Now players wonder who has access to what information, when, and if they're using it to gain an edge by playing on rival daily fantasy sites. DraftKings and FanDuel have responded to the controversy with a joint statement, which is included after the break.
