Two major fantasy sports companies face allegations that their employees used insider information to bet at rival companies, the New York Times reported Monday. The allegations further incited the debate about whether betting on fantasy sports is a more serious offense than illegal sports gambling -- and whether it should be regulated.
Fantasy leagues involve online competitions among fans with hypothetical teams. The success of the teams is ultimately based on an average of the individual sports players' performances throughout the season, so data are invaluable in the competition. Employees at the fantasy companies have access to such information, and two companies -- DraftKings and FanDuel -- have acknowledged that employees won considerable prizes on competitors' sites.
A midlevel content manager at fantasy company DraftKings admitted to inadvertently releasing data before the start of the third week of N.F.L. games. The employee came forward after he won $350,000 at rival site FanDuel the same week.
Some leagues do not require payment, but companies such as DraftKings and FanDuel have launched online daily and weekly games in which users pay an entry fee to access the site, creating prize pools that can pay $2 million to the winner. Critics argue that the setup parallels that of Las Vegas-style gambling, which is typically prohibited in the sports world.
Insider trading allegations, but not on Wall Street this time – at DraftKings and FanDuel. http://t.co/0z9zmI4Zi0
— NYT Business (@nytimesbusiness) October 5, 2015
Following the allegations, DraftKings and FanDuel both temporarily banned their employees from involvement in games or tournaments on other sites (employees were already forbidden from playing on their own company site). The companies released a joint statement to the New York Times:
“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,” the statement said. “Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”