Is DraftKings More Like Online Gambling or the Stock Market?

Allegations of "insider trading" at the popular daily fantasy site bubble to the surface.

DraftKings logo (PRNewsFoto/DraftKings, Inc.)

DraftKings logo (PRNewsFoto/DraftKings, Inc.)

The online gambling daily fantasy sports world has been rocked by recent allegations that can only be described as something akin to insider trading.

It all started last week when reported DraftKings employee Ethan Haskell released internal information that could help fantasy football players. After the release of the information, Haskell went on to win $350,000 in a game organized by the the company’s main competitor, FanDuel, though it is unclear if he used the leaked information to his advantage.

DFSR later revealed in a follow up post that FanDuel employee Matthew Boccio, a “player pricing expert at FanDuel,” is killing it as a player on DraftKings when he is off the clock at his main job. DFSR said in its postings that it reported on Boccio and Haskell to point out that insiders at both companies are winning at their own games.

It should be noted that Boccio did not leak any information to other players like Haskell.

Why is this a big deal? Well, in the world of daily fantasy sports where everything is pretty much the same except for the names of the sites, having access to the kind of information Boccio and Haskell would give someone an unprecedented advantage over. Any little edge, like, say, internal access to player roster popularity, could be the difference between winning $10 and $1 million.

In Tuesday’s New York Times, a spokesman for DraftKings told the Paper of Record employees for both companies are winning huge jackpots on other daily fantasy sites but that is coming to an end. After news about the recent winnings percolated around the fantasy sports world, the two sites subsequently banned employees from participating in daily fantasy sports on other sites.

Additionally, the incidents with Boccio and Haskell prompted the two companies to issue an unusual joint statement:

Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.

However, we continue to review our internal controls to ensure they are as strong as they can be. We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love.

These incidents do not bode well for Boston-based DraftKings, a site that has caught the watchful eye of Attorney General Maura Healey. Healey, a staunch gambling opponent, has raised concerns about the company and met with their staffers. These incidents may not be illegal but they will probably set off alarm bells for state regulators like Healey who are looking to crack down on the nascent sites.

The last thing the booming daily fantasy sports industry needs is to be identified with two things regulators love to beat up on: online gambling and the perception it is a rigged for insiders.