The daily fantasy industry is suffering through one of its first crises after a DraftKings employee inadvertently posted player percentage data before the day’s games had begun.
Ethan Haskell, a mid-level content editor of the Boston-based site, published a report detailing the percentage of DraftKings’ users which had decided to run certain players in its Week 3 Millionaire Maker contest. This data is regularly released in posts on Playbook, the site’s blog, but only after the games included in the slate have finished.
While Haskell maintains that he only gained access to the information after games were locked at 1 PM, players began to question the assertion. Akin to stock market insider trading, anyone with that knowledge could gain a substantial advantage over opponents.
DraftKings claims that its employees are forbidden from playing DFS on the site, but that doesn’t stop them from putting in high-volume with its competitors. In fact, it was soon highlighted that Haskell had made a $350K score at FanDuel that same week, leading some to think that he used DraftKings insider knowledge to set his winning roster.
RotoGrinders founder Cal Spears defended Haskell, who was once an employee of the site. “I know Ethan well. His first job in the industry was with RotoGrinders and he actually worked out of the office with us in Nashville before moving back to Boston and taking a job with DK,” he said. “I believe him, and his story follows logic, so I will stand by it.”
Statements come up short
As promised, DraftKings and FanDuel released similar statements concerning the incident on their websites today.
“Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”
Many weren’t impressed with the releases, which asked for a lot of trust, but came up short on details. What policies do they have in place to restrict access to the company data? Just how, exactly, are employees with special access “rigorously monitored?”
Calls for regulation
At a time when DFS is in the public eye, the affair lends urgency to the call for the industry to be regulated. While daily fantasy received a carveout in the Unlawful Internet Gambling Enforcement Act, some lawmakers have called for hearings to clarify if DFS contests are indeed skill-based.
Parallels to online poker
For those familiar with the Wild West years of the online poker industry, the incident could bring back very bad memories. In 2007, executives for the websites Absolute Poker and UB were found to have used insider access to make millions of dollars playing against users at their own sites.
Many players at the two sites were refunded, but only after a group of high-stakes poker players proved conclusively they had been cheated. Due to the unregulated nature of the industry, there was little law enforcement could do to punish the perpetrators.
Soon after, Absolute Poker, UB and Full Tilt were effectively shut down by the US Department of Justice, who froze assets belonging to the organizations. Once the DOJ shed light on the financial practices of the three poker sites, it was discovered that they could not cash out their players as they had not kept deposits in segregated accounts from operating expenses. In the case of Absolute Poker and UB, players lost every cent they had in their accounts; PokerStars purchased Full Tilt and paid its players back in full.
Something similar could very well happen at a DFS site today, if the industry remains unregulated. Players should not be lulled into a false sense of security when they see daily fantasy ads running day in and day out on TV. Without someone watching over the industry, anything is possible.