Insider Trading Linked To Daily Fantasy Sports
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MIAMI (CBSMiami) – By now you've seen ads everywhere for FanDuel and DraftKings, two companies who claim to pay out massive amounts of cash every day as industry leaders in the growing world of online daily fantasy sports.
It's a business model built on the same simple principles as the sports books in Las Vegas - pick a winner. However, instead of betting on a particular team or score, fans root for an individual player's success on the field during a particular game. Pick a hypothetical team of players, dubbed your "fantasy team," and compete against other teams for money and bragging rights in a match of sports intelligence.
Like the state lottery, the rise in popularity with these leagues comes with the appeal that even a $1 bet can win as much as $2 million. It's something that has been on the radar for lawmakers ever since a federal exemption was made in 2006 deeming it a game of skill, rather than chance, like other online casino games.
But the industry is about to be put under the microscope even further after a report from the New York Times said a DraftKings employee admitted to making $350,000 in one week using insider information.
The employee allegedly used sensitive analytical data, not yet released to the public, in order to see what athletes were being targeted the most by the thousands of fantasy players around the world. He, then, logged on to the company's rival, FanDuel, and applied that info to his benefit. This exclusive info is generally released only after the games have started.
In a joint statement, DraftKings and FanDuel defended their practices:
"Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it."
With more than 60 million people playing each week, the question now becomes whether or not they are playing on an even field, or if it's all just fantasy.
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