LAS VEGAS (AP) Cheating allegations rocked the daily fantasy sports industry this week and as scrutiny mounts, a largely self-aimed spotlight has grown blindingly bright on DraftKings and FanDuel, which have flooded televisions, phones and computers with advertisements promising million-dollar payouts to a lucky few.
It all began when players noticed a DraftKings employee – and frequent winner in competitor FanDuel’s contests – posted a list online that ranked which NFL players were picked the most for a DraftKings contest that was still accepting entries. The employee said it was a mistake, nothing more, acknowledging the information shouldn’t have been posted before the contest closed. But suspicions grew about the use of insider knowledge when people noticed the employee’s particularly lucrative win on FanDuel around the same time for $350,000.
It became a flashpoint for more concerns about the unregulated industry that had already faced questions about its behind-the-scenes practices to ensure a fair game.
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Here are the basics on the industry, the debate and what might happen next.
HOW DO DAILY FANTASY SPORTS WORK?
The sites take traditional season-long fantasy leagues – where points are earned each week based on a roster of players picked before the season’s start – and squeeze the stats down to a day or week. Customers playing for free or paying for an entry, as low as a couple quarters or as much as thousands of dollars, get a ”bankroll” to spend on players to create a fantasy team for the day. Like most games, the competitor who earns the most points based on those players’ statistics wins. Unlike traditional sports betting in Las Vegas, customers play against others, not the house, and winning isn’t determined by a single game’s outcome.
IT’S NOT GAMBLING? IT’S NOT ILLEGAL?
The sites and their defenders argue the games are based more on skill, not luck like sporting bets in Las Vegas, and point to a specific exemption carved out for fantasy sports in the Unlawful Internet Gambling Enforcement Act of 2006. It was enacted at a time when season-long fantasy sports matchups, not daily ones, were becoming popular in work places and online on Yahoo and CBS Sports. Daily fantasy sports emerged years later. New York-based FanDuel started in 2009. Boston-based DraftKings came along during the 2012 baseball season. Still, both say the law that addresses processing payments for online gambling applies to them. That law doesn’t necessarily make the sites OK in states where the definition of gambling can vary wildly depending on if the contest is entirely skill-based or mostly skill-based. That’s kept both out of at least five states.
HOW INVOLVED ARE THE MAJOR SPORTS LEAGUES?
The NBA has a stake in FanDuel. MLB, the NHL and Major League Soccer are DraftKings investors. The NFL hasn’t made any direct investments or partnership deals but its teams are allowed to accept advertising from the sites. The league has said the contests aren’t gambling because players need skill to play and win. ESPN said it was cutting sponsored DraftKings elements from within its news shows but not the frequent commercials.
WHAT ABOUT THE NCAA?
The governing body for college sports, which has strict rules for its players prohibiting sports betting, has expressed its discomfort with daily fantasy sports. Seeing a parallel between it and gambling, the Southeastern Conference recently asked sports network ESPN to remove the companies’ ads from the SEC’s network. And commissioners for the Football Bowl Subdivision want DraftKings and FanDuel to stop offering college sports fantasy contests on their sites.
WHAT HAPPENS NEXT?
Both DraftKings and FanDuel agreed this week to immediately bar their employees from playing daily fantasy sports on other sites and said they are taking measures to ensure employees from other sites aren’t playing in their contests. Both had already prohibited employees from playing on their own sites.
The companies have also said that internal investigations revealed no wrongdoing on the part of the DraftKings employee who prompted the scrutiny, but both said they hired outside law firms and former prosecutors to review the facts.
Federal lawmakers have called for hearings to review what happened and New York’s attorney general is investigating.
There’s already one lawsuit, at least, pending against FanDuel and DraftKings alleging fraud and conspiracy and hoping to become a class-action claim.