The “insider trading” scandal, touched off when a DraftKings employee inadvertently published NFL player percentages ahead of schedule, has grown exponentially since the mistake was uncovered over the weekend. On Monday, the New York Times took the story to a whole new level by reporting on the fact that both FanDuel and DraftKings have been forced to release statements denying that their employees had access to valuable private information.
Soon afterwards, it was revealed that the New York Atty. Gen. Eric Schneiderman had launched an inquiry into the event. “It’s something we’re taking a look at – fraud is fraud,” he said in a radio interview yesterday. “And, consumers of any product, whether you want to buy a car or participate in fantasy football, our laws are very strong in New York and other states that you can’t commit fraud.”
What the New York AG is requesting
In conjunction with the investigation, Schneiderman sent a letter to DraftKings requesting several pieces of information which will give lawmakers a peek inside the site’s security controls. The AG gives DraftKings until October 15 to provide the following info:
- The identities of employees who have access to sensitive data, or who are responsible for setting the prices of athletes for daily contests.
- The location where the above data is stored.
- Whether or not DraftKings limits access to that data, and if so, to explain what measures they have in place to keep out those not approved.
- Copies of the employee handbook, data usage policy and any other formal policies or procedures concerning company data, along with policies concerning employees playing on competitor sites.
- Policies in place to restrict the friends or relatives of employees from leveraging private DraftKings information on their own. Policy limiting the winnings that can be claimed by employees, their friends, and/or their relatives from playing on the site or on rival sites.
- A detailed description of the event involving Ethan Haskell’s early publishing of player percentages, along with the company’s response to the crisis.
- A detailed description of any other incidents in which a company employee may have used inside information to profit from daily fantasy sports.
FanDuel’s damage control
Today, FanDuel released a statement assuring that its employees have now been permanently banned from playing on any daily fantasy site for real money. Furthermore, it will now require customers to confirm that they do not work for a rival site.
They have also tapped former federal judge and US Atty. Gen. Michael Mukasey to conduct a third-party audit on the site’s internal security controls, standards and practices. “He will have the freedom and authority to look at any areas he thinks appropriate,” the company said in a statement. “We will ask him and his team at the law firm Debevoise & Plimpton to develop a set of recommendations for us to adopt.”
DraftKings’ damage control
DraftKings sent CEO Jason Robins on a media blitz today, where he made appearances on Fox News and ESPN. Robins reiterated that company logs clearly show that Ethan Haskell did not access the percentage report before contests were locked for the day.
Like FanDuel, the Boston-based site has claimed to have contacted a third-party law firm to conduct an independent investigation and make public a summary of its findings. In fact, Robins stated that the site had already been in contact with third-party auditors even before the incident occurred.
Robins inferred that DraftKings employees will no longer be able to play DFS at any site for money. “We have never allowed employees to play in any of the public games at DraftKings,” he told Fox News. “And now it’s clear they shouldn’t be allowed to play in any of the public games on any of the competitors’ sites, so that’s a policy that we have put in place.”
Asked whether he knew how many of his own employees have played on FanDuel, or how much they had one, he replied that he didn’t know “offhand.” Justine Sacco, PR spokesperson for FanDuel revealed this week that internal company data showed that DraftKings employees had won .3% of all money that the site has awarded in its history. Analyst put that number at $2 billion, meaning that DraftKings employees have won about $6 million alone.