Fantasy sports giants ban employees from games over cheating concerns

Posted at 7:37 AM, Oct 06, 2015
and last updated 2015-10-06 07:40:39-04

NEW YORK (CNNMoney) — Two of the biggest companies in the $1.5 billion business of fantasy sports, DraftKings and FanDuel, have banned employees from playing fantasy games for money amid claims that workers used insider information to place their own bets.

The two companies, along with the Fantasy Sports Trade Association, said in a statement that the ban would be in effect until a detailed industry policy on data access is established.

The New York Times reported that a DraftKings employee had admitted to accidentally leaking confidential data last week.

A forum on RotoGrinders, a fantasy sports media site, includes a post that appears to be from an employee in which he apologizes for posting information in error.

The potential for cheating set off alarm bells for a fast-growing business with little formal regulation and big money at stake. DraftKings alone expects to pay out close to $2 billion in prizes this year.

The worry is that if insiders act on the information they have access to — either on their own site or a competitor’s — they would gain an unfair advantage over the general public.

The three organizations said the FSTA charter requires member companies to restrict employee access to competitive data for play on other sites, and there is no evidence that any employee or company has violated these rules.

“That said, the inadvertent release of non-public data by a fantasy operator employee has sparked a conversation among fantasy sports players about the extent to which industry employees should be able to participate in fantasy sports contests on competitor sites,” they said in a statement.

Billion-dollar business

DraftKings and FanDuel are the largest players in the fantasy sports industry behind three big names: ESPN, Yahoo and CBS.

FanDuel was started in 2009, and DraftKings in 2012. They have achieved multi-billion dollar valuations from investors.

Each firm recently raised about $300 million in financing, which they’re using to blanket stadiums with ads.

Between them, the two companies have sponsorship deals with 28 of the 32 NFL teams, worth an estimated $6 million to $7 million to the teams, according to research firm IEG.

Sports leagues, team owners and media companies have invested in the growing fantasy sports business.

For example, Major League Baseball and the National Hockey League have equity stakes in DraftKings, and the National Basketball Association has equity in FanDuel. Time Warner, the parent company of CNN, has made an investment in FanDuel.

Although the National Football League itself has not taken a stake in either company, a number of NFL and NBA team owners have invested in FanDuel.

And DraftKings recently signed a deal with the NFL Players Association to use current players in broadcast, print, social media, digital and mobile ads. The NFLPA declined to comment Monday.

Little regulation

Fantasy sports has been criticized by some for getting close to the line of illegal sports gambling. Though federal law permits fantasy sports, some say it should be regulated.

DraftKings and FanDuel say they’re willing to work with competitors on self-policing.

“We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love,” the companies said in a statement.

–CNNMoney’s Chris Isidore and Rob Mclean and CNN’s Dave Alsup and Kevin Dotson contributed to this report.