N.Y. Attorney General's Office Begins Probe Of Daily Fantasy Sports Sites
NEW YORK (CBSNewYork) -- Daily fantasy sports are under the microscope after allegations that an employee might have used inside information to win it big.
The allegations have now prompted the launch of a probe by the New York State Attorney General's office.
According to a report in The New York Times, a DraftKings employee admitted he released early data on what specific players were most used in starting lineups before the NFL's Week 3 games. Receiving that information early could serve as an advantage. The employee went on to win $350,000 that week betting on rival site FanDuel.
In a joint statement, both companies say internal fraud monitoring found no misuse of information. It has been explained the employee picked his players before the data were available, WCBS 880's Sean Adams reported.
But DraftKings also admitted that employees of both companies had won big prizes playing at other sites, the Times reported.
"It really does on some level give at least a pause to anyone who thinks that this is not a fair game," Robert Boland, who teaches sports law at Ohio University, told CBS News.
DraftKings and FanDuel both ban employees from playing on their own sites. As of Monday, they have temporarily barred them from participating in games on rival websites as well.
Fantasy sports allow fans to select a virtual team of real-life players and accumulate points based on their performances. The popularity of the games has exploded over the past 15 years.
While many season-long leagues are comprised of friends or co-workers who play for free or pay fees of varying amounts into a jackpot to be paid to winners, a new crop of online daily fantasy sports sites such as DraftKings and FanDuel have popped up in recent years. Those sites allow paying participants to select a new team, or multiple teams, every day, and large cash prizes are awarded to the top performers.
Fantasy sports are mostly unregulated. The federal government does not define it as gambling, but rather calls it a game of skill, not chance.
But New York State Attorney General Eric Schneiderman has now launched a probe into both DraftKings and FanDuel.
"It's something we're taking a look at. Fraud is fraud. And, consumers of any product…whether you want to buy a car, participate in fantasy football, our laws are very strong in New York and other states that you can't commit fraud," Schneiderman said in a statement. "This is another example of the cleverness and the real, sort of, deviancy that goes into some of these fraud schemes...I don't have comments on the specifics of that matter at this time. But fraud is fraud and we'll investigate it wherever we find it."
The Attorney General's office asked DraftKings and FanDuel to provide their employee handbooks, data usage policies, and formal policies and procedures on use of company data and employee participation in fantasy sports. The AG also asked the companies to explain their various policies in detail.
Some lawmakers also have concerns and think the multibillion-dollar industry should be regulated.
Rep. Frank Pallone, D-N.J., ranking member of the Energy and Commerce Committee, last month asked the panel to review the legal status of fantasy sports.
Pallone wants to know how exactly fantasy sports differ from traditional sports gambling, which is illegal except in states that legalized it before 1992.
