Daily fantasy sports betting is getting to be so popular in the United States that insider trading is alleged to have raised its ugly head here. There have been reliable accounts of fantasy sports sites employees trying to get a piece of the action, and even placing very successful bets thanks to the information they are privy to. As a matter of fact, both DraftKings and FanDuel have been facing investigations by the office of the New York Attorney General into possible insider trading. In fact, the two companies have even gone so far as to ban their employees from participating in daily fantasy sports by gambling using money.
The fantasy sports betting business in the United States is worth billions of dollars annually, with more than 35 million Americans having taken part in it sometime or the other. Furthermore, this figure is only set to grow, given that the Americans are not permitted to bet on actual sports legally. Both DraftKings and FanDuel earn tens of millions of dollars in revenue every year and they are each valued in excess of a billion dollars. Daily fantasy sports exists as a legal option only on account of a loophole in the law that that terms it a game of skill and not of chance.
DraftKings and FanDuel have both been hit by insider trading allegations, of late. In fact, an employee of DraftKings is reported to have won a whopping $350,000 by placing bets on FanDuel. The bet in question was placed during the third week of the ongoing NFL season, and the employee is believed to have accessed inside information regarding the performances of individual athletes. With data of the best athletes in hand, the person was then able to make excellent bets, keeping him ahead of other customers who obviously had no access to the information.
The insider betting scandal goes to show that the daily fantasy sports business is badly in need of regulation. The business will lose the trust of customers if it is not managed properly. DraftKings has already felt the repercussion of the scandal with ESPN temporarily pulling its ads from its network for the duration that the incident is in the news. This is definitely something for DraftKings to be worried about since ESPN’s sponsorship deal with it worth $250 million.
The New York Attorney General office has demanded that the two companies hand over all details unearthed during their individual probes into the scandal. Both companies have lawyered up, with DraftKings hiring a legal team that includes former United States Attorney John Pappalardo and FanDuel hiring former U.S. Attorney General Michael Mukasey. The legal teams will be expected to review the findings of their internal probes, so that corrective measures can be taken. Both DraftKings and FanDuel are committed to regaining the trust of their customers and this will only happen if they operate with complete honesty and transparency. After all, this business is clearly too big and too lucrative to be taken for granted.