Two of New Jersey's federal lawmakers called for federal regulation of daily fantasy sports companies Tuesday, little more than a week after an inside information leak brought renewed scrutiny to the industry’s internal practices. But the scandal and ensuing growing calls for formal oversight have had little effect on FanDuel and DraftKings, both of which saw a record number of user entries last weekend.
U.S. Sen. Robert Menendez and U.S. Rep. Frank Pallone held a joint press conference in East Rutherford, New Jersey, days after they penned a letter to the Federal Trade Commission urging it to consider implementing controls on the daily fantasy sports industry. At present, companies like FanDuel and DraftKings operate legally, with little formal oversight. The lack of regulation stems from a 2006 federal statute that excluded fantasy sports from bans on forms of online gambling.
“If a consumer goes to the racetrack and makes a bet, that’s a highly regulated bet,” Pallone said at the press conference, according to NJ.com. “They have the confidence of knowing the racing commission or the state is watching what’s going on.” The FTC has yet to comment on the letter or announce whether it will investigate the daily fantasy sports industry.
DraftKings and FanDuel are at the forefront of the rapidly expanding daily fantasy sports industry. Both companies are valued at more than $1 billion and have raised hundreds of millions of dollars in private capital. Overall, the daily fantasy sports industry will produce about $2.6 billion in entry fees this year, with that number expected to rise to $14.4 billion by 2020, industry analysis firm Eilers Research estimates, according to the New York Times.
The two companies have faced unprecedented criticism since last week, when a report surfaced that DraftKings employee Ethan Haskell accidentally leaked inside information about which NFL players appeared most in user lineups the same week he won $350,000 in a FanDuel contest. The scandal drew rebukes from several prominent lawmakers, including Sen. Harry Reid (D-NV), and led New York’s attorney-general to open a formal inquiry into the companies’ internal safeguards. Both FanDuel and DraftKings banned their employees from participating in any paid fantasy sports games and hired third-party experts to examine their internal protocols.
So far, the increased scrutiny and concerns about consumer fraud have done little to dissuade fantasy sports players from signing up for contests. FanDuel and DraftKings combined to receive a record 7.1 million entries in their paid contests from Sunday, Oct. 11, according to data compiled by UK-based industry analysis firm SuperLobby.
DraftKings attracted 4.14 million entrants last Sunday, compared to 3.75 million on Sunday, October 4, ESPN reported. The company recorded a $2.6 million profit on Sunday alone. FanDuel had 3.38 million entrants last Sunday, compared to 3.18 million the previous Sunday.