DraftKings and FanDuel face up to insider trading allegations

DFS operators defend integrity of their businesses following data leak by employee

The two largest daily fantasy sports (DFS) operators have defended the integrity of their businesses after allegations of insider trading related to a DraftKings employee winning US$350,000 on rival site FanDuel. [private]

Both operators issued statements along with the Fantasy Sport Trade Association (FSTA) after a DraftKings employee admitted to inadvertently releasing data ahead of the third week of the NFL season.

The staff member is then understood to have won $350,000 on rival site FanDuel during the same week.

The leaked data, published on DraftKings’ blog, is believed to have shown which players were most used in lineups submitted for DraftKings’ Millionaire Maker contests.

But in its most recent statement, DraftKings said there was “confusion” regarding the data leak and that some reports had “mischaracterised the situation” by “implying there was wrongdoing.”

DraftKings said it had “conducted a thorough investigation” by examining records of internal communications, access to its database, interviewing employees, and sharing information about the incident with FanDuel.

The operator said its findings showed that the employee in question did not receive data on player utilization until 1:40pm on Sunday, September 27.

It claimed lineups on FanDuel were locked in at 1pm that day, at which point the employee, along with every other person playing in a FanDuel contest, could no longer edit their player selections.

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

“Again, there is no evidence that any information was used to create an unfair advantage, and any insinuations to the contrary are factually incorrect.”

In a separate joint statement with DraftKings, FanDuel said both companies have “strong policies in place” to ensure that employees to not “misuse” and information at their disposal and “strictly limit access to data “only to those employees who require it to do their jobs.”

“However, we continue to review our internal controls to ensure they are as strong as they can be,” the statement said.

“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 FSTA said nothing was more important than game integrity, and that a clause in its charter stated members must restrict employee access to and use of competitive data for play on other sites.

“At this time, there is no evidence that any employee or company has violated these rules,” the FSTA said in its statement.

But the trade body said the data leak had “sparked conversation” among players about the extent to which industry employees should be allowed to participate in contests on competitor sites.

“We’ve heard from users that they would appreciate more clarity about the rules for this issue. In the interim, while the industry works to develop and release a more detailed policy, DraftKings and FanDuel have decided to prohibit employees from participating in online fantasy sports contests for money,” the FSTA statement added.