New York opens inquiry into fantasy sports companies

Schneiderman also asks the companies to explain their policies on limiting winnings that can be claimed by employees, their friends, and/or their relatives from playing daily fantasy sports on FanDuel, DraftKings, or other rival platforms.

Both start-up companies have been reacting to concerns about the integrity of their games this week because of a recent data breach involving a DraftKings employee.

FanDuel said in a statement that it has hired former U.S. Attorney General Michael Mukasey “to conduct a review to identify ways that we can ensure we are doing the right things to maintain the trust we have with our players”.

New York Attorney General Eric Schneiderman said Tuesday he would probe DraftKings and FanDuel in an effort to uncover unfair advantages employees from each company could have, ESPN reported.

In fantasy sports, fans choose from real players in a draft or an online selection process to assemble a fantasy team.

The lucrative world of online fantasy sports gaming faced an inquiry from New York authorities over allegations of “insider trading” critics say underscored the need to better regulate the multibillion-dollar industry. It also permanently banned its employees from playing any fantasy games for money on any site. At least in theory, instead of the DraftKings and FanDuel employees taking home prize money, it’ll be users.

FanDuel, in addition to the game ban for its employees, announced other measures.

“This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup”, the statement continued.

The attorney general’s move may shed light on the inner workings of the sites, which charge a fee and allow participants to build rosters of hypothetical teams and score points against hundreds of competitors based on the actual performance of players.

While legal in most US states, daily fantasy sports is unregulated, unlike casinos and lotteries.

The sites are responding to revelations that over the weekend, a DraftKings employee inadvertently released information related to the use of National Football League players in daily fantasy lineups.

The fantasy provider has partnerships with almost every major sports league in North America and is known for its ubiquitous advertising campaign that has come to dominate sports broadcasts over the past year.

The House of Representatives could hold hearings this fall, said Representative Frank Pallone, the top Democrat on the Energy and Commerce Committee. The data the DraftKings employee supposedly used was the percentage of fans who had chosen certain players.

ESPN reduced its association with DraftKings as well.

“Most people, when they talk about us, frankly, they start with: ‘Oh, your business is all about the money, ‘” said FanDuel’s chief financial officer Matt King last week, before the scandal broke.