FanDuel bans employees from playing fantasy games for money

The daily fantasy sports league has been in hot water over allegations of potential fraud

(Updated with news from DraftKings)

FanDuel has found itself in some pretty hot water the last few days when it came to light that its employees, as well those from its rival DraftKings, were using insider information to play on each others leagues. The Attorney General from New York has even gotten involved, launching an investigation into whether the companies committed fraud.

Now FanDuel announced on Wednesday that it is taking action, while also denying that anying untoward took place.

The first action is the most obvious: FanDuel employees are now explicitly banned from playing any daily fantasy games for money, on any site. In addition, the company said that, from now on, it will require all of its  customers to confirm that they are not an employee of any other third party fantasy site. If they are, they will not be allowed to access the website.

It's not entirely clear how FanDuel would be able to verify if its customers are, or are not, employees of DraftKings or any of its other competitors, or if it will simply be trusting its customers to tell the truth. I reached out to FanDuel for more clarification on this matter, but a company spokesperson would not comment any further.

On top of that, FanDuel is taking additional steps to stem what could be a PR disaster. First it is asking Michael Mukasey, former federal judge and United States Attorney General to look over its internal controls, standards and practices, in order to make sure that FanDuel is doing everything it can to make sure everything is on the up and up.

Mukasey and his team at the law firm of Debevoise & Plimpton are going to develop a set of recommendations for FanDuel to adopt.

Finally, FanDuel is creating an internal advisory board, led by Michael Garcia of the Kirkland & Ellis law firm and former United States Attorney for the Southern District of New York.

The advisory board will provide the company with on-going advice, recommendations and guidance. FanDuel will also be speaking with regulators how to define the right set of rules for its industy.

This whole thing started on Monday, after a DraftKings employee named Ethan Haskell inadvertently let the cat out of the bag by posting insider information on NFL lineups before they had been publicly posted. He won $350,000 on FanDuel.

After that, New York Attorney General Eric Schneiderman has now opened an investigation into the matter, sending letters to both companies, asking both of them for internal data, as well as details, on how they prevent fraud. He also wants details on any internal investigations that the companies have done into their employees.

Despite, all of these steps it is taking, FanDuel is still saying that there was no problem in the first place, but that it is just taking these steps in order to make sure that it does not alienate its customers.

"Media reports yesterday raised issues concerning an employee from another fantasy site participating in our NFL Sunday Million contest last week. Trust with our players is core to our business and has always been our primary concern so we take any potential game integrity issue very seriously," the company wrote in its press release.

"Based on everything we know thus far, there is no evidence indicating that the integrity of FanDuel's contest was in any way compromised, or that non-public information was used for unfair advantage. That said, the incident has raised questions about the trust-based relationship we have with our players so just relying on what we know right now isn't enough.

Update:

Now DraftKings has followed suit and also banned its employees from partaking in betting in online fantasy leagues.

Here is a statement posted to DraftKings website on Wednesday in full:

"As a leader in the Daily Fantasy Sports industry, we take the trust of our community very seriously and remain fiercely committed to the integrity of DraftKings’ Daily Fantasy Sports product.

Effective immediately, DraftKings employees will be permanently prohibited from participation in any public daily fantasy games for money. We will also prohibit employees from any Daily Fantasy Sports contest operator from participating in games on DraftKings. We are glad to see that others in the industry have followed suit and believe that this is an important next step in retaining the trust of our players.

DraftKings has engaged a legal team from Greenberg Traurig, led by former United States Attorney John Pappalardo, to review our findings and conduct an investigation specific to the allegations against one of our employees. We will release the summary of those findings upon completion.

Furthermore, in order to maximize the integrity of our product and the protection of our players, we have been working with Greenberg Traurig to advise us on ensuring that our policies and practices are second to none.

DraftKings’ explosive growth is a testament to our ability to deepen our fans’ engagement with the sports they love. We are committed to reinforcing the trust and security of our millions of loyal customers."

(Image source: 2eightphotography.net)