Insider Betting at DraftKings and FanDuel Brings the Feds A-Sniffin

October 21, 2015
Fantasy Sports

There is no real secret in the USA that the federal government seeks to control most everything it can. Right or left, independent or indifferent, everyone realizes that the government will regulate anything it can get under its wings. Though for years now, fantasy sports have been a pretty hands-off genre per government influence. In fact, until a scandal broke nearly two weeks ago with the big fantasy sites, the government had no plans to regulate, and did not have their fingers on any proverbial buttons within the industry. Though leave it to employees of the companies participating in the equivalent of “insider trading” to bring the feds sniffing around the genre.

Nearly two weeks ago, it was discovered that a couple of employees from mega-sites DraftKings and FanDuel were actually sharing insider information, at least according to government, when betting against one another in fantasy football leagues. Whether or not employees have true “inside” information just because they work for fantasy sites is a topic all unto itself. However, the mere fact it happened sent many into a total frenzy, particularly government who wondered why they were not regulating this genre.

Did fantasy fans care that employees were betting with one another on rival sites? According to the firm SuperLobby, that handles statistical analysis, the two daily fan-league sites recorded their biggest number of tournament entries one week after the scandal broke.

Fans seem to realize what government cannot. Just because you have a guy who knows how to code the page on DraftKings and create the colorful buttons that allow you to join leagues, that in no way means he has actual insider knowledge. In other words, these employees may know their site-based stuff, but they’re not speaking with Jerry Jones of the Cowboys about the health of Tony Romo, and Aaron Rodgers isn’t performing his Discount Double-Check dance at their kids’ birthday parties. These people still have to compete in fantasy, just like anyone else, and the idea that they have an unfair advantage is something most fantasy fans consider preposterous. But what fans think does not matter; it’s all about what government thinks.

But what really actually happened? According to the information released, a content manager at DraftKings, Ethan Haskell, published ratings of player popularity percentages a few hours before they were supposed to be published. Mr. Haskell then went on to win $350,000 on FanDuel that same day. The timing is suspicious, but can one really gain a clear advantage by knowing which players are the most popular? Anyone who has ever watched an NFL game, or a show on ESPN knows that Tom Brady is a more popular QB than Luke McCown, or that Larry Fitzgerald is a more popular WR than Heyward-Bey. The companies themselves contend that this data was not used unfairly, and that is it just a coincidence that Haskell ended up winning money. The government, of course, feels differently.

Many within government have started chirping the same tune. They want regulation on legal fantasy sports, which means they want to go line-by-line and dictate what every employee can do, what every site can offer, and even set pricing controls. That is the level of “oversight” the government wants. What the fans want, on the other hand, is to be left alone to play, evidenced by the record-setting numbers only one week after the Haskell scandal broke.

Perhaps the biggest issue here, when you break it all down, is that fantasy football players know how fantasy sports are played, whereas the government does not. We will ultimately see what comes of this, but for right now it’s just the government sniffing around. There are no real plans to regulate yet. And if those plans do arise, we will give you that report.