When your brand is uttered in the same breath as “insider trading” you know you have a serious crisis on your hands.
It’s what two of the major fantasy sports companies are now facing after they were forced to release statements Monday defending their businesses’ integrity after what amounted to allegations of insider trading and that employees were placing bets using information not generally available to the public. That’s according to the New York Times.
The statements were released after an employee at DraftKings, one of the two major companies, admitted last week to inadvertently releasing data before the start of the third week of N.F.L. games, the Times said. The employee, a midlevel content manager, won $350,000 at a rival site, FanDuel, that same week.
Both DraftKings and FanDuel are now under the glare of the media, regulators and, quite possibly, the U.S. Congress.
Fantasy Sports, of course, has become all the rage in the last few days, with wall-to-wall ads during football game broadcasts.
They started off innocently enough, with fans playing against each other for the fun of it. But more recently fantasy sports have ballooned into a billion-dollar business.
Daily games will generate around $2.6 billion in entry fees this year and grow 41 percent annually, reaching $14.4 billion in 2020, per Eilers Research.
According to the Times, both DraftKings and FanDuel have set up online daily and weekly games based on a similar concept in which fans pay an entry fee to a website—from 25 cents to $1,000—to play dozens if not hundreds of opponents, with prize pools that can pay $2 million to the winner.
On Monday, DraftKings and FanDuel released a joint statement that said “nothing is more important” than the “integrity of the games we offer,” but offered few specifics about how they keep contests on the level.
A spokeswoman for DraftKings told the Times that Haskell simply made a mistake and that the company was certain he did not use the information improperly. She declined to go into specifics about the safeguards or the company’s auditing policies.
Among federal and state and regulators, that last statement probably won't cut it. If history is any indication, both companies will have to be much more transparent and specifically show authorities their “safeguards” auditing policies.
Otherwise, the reputation of the fantasy leagues may start to erode, and the industry could be known for a refusal to police itself.
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