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HughPickens.com [hughpickens.com] writes:

Joe Drape and Jacqueline Williams report at the NYT that a major scandal is erupting in the multibillion-dollar industry of fantasy sports [nytimes.com], the online and unregulated business in which an estimated 57 million people participate where players assemble their fantasy teams with real athletes [wikipedia.org]. Two major fantasy companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading, that employees were placing bets using information not generally available to the public. “It is absolutely akin to insider trading. It gives that person a distinct edge in a contest,” says Daniel Wallach. “It could imperil this nascent industry unless real, immediate and meaningful safeguards are put in place."

In FanDuel’s $5 million “NFL Sunday Million” contest this week, DraftKings employee Ethan Haskell placed second and won $350,000 with his lineup that had a mix of big-name players owned by a high number of users. Haskell had access to DraftKings ownership data [time.com] meaning that he may have seen which NFL players had been selected by DraftKings users, and by how many users. In light of this scandal, DraftKings and FanDuel have, for now, banned their employees from playing on each other's sites. Many in the highly regulated casino industry insist daily fantasy sports leagues are gambling sites and shouldn’t be treated any differently than traditional sports betting [bostonherald.com] and, as a result, should be regulated and Chris Grove says this may be a watershed moment for a sector that has resisted regulation but now may need it to prove its legitimacy. “You have information that is valuable and should be tightly restricted,” says Grove. “There are people outside of the company that place value on that information. Is there any internal controls? Any audit process? The inability of the industry to produce a clear and compelling answer to these questions to anyone’s satisfaction is why it needs to be regulated.”

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