In the midst of football season, the big story today in the New York Times and all of other financial papers is the insider trading held amongst the two leading fantasy football sites, DraftKings & FanDuel. New York Times reported earlier this week that due to an accidental post of confidential data by a DraftKings employee, various fantasy players and members were notified and alerted of possible insider trading within the company. Because of these findings, the New York attorney general has opened an inquiry into the fantasy sport site’s employees and overall operations.
DraftKings and FanDuel are two of the most popular daily fantasy sports-contest service providers. They are recognized to be two of the biggest leaders of the fantasy sports industry that allows customers to enter daily and weekly fantasy sports-related contest and earn money based on individual player performances. The categories of sports include baseball, football, hockey, basketball, golf, soccer (UEFA and Premier League) NASCAR auto racing, mixed martial arts, as well as American college football and college basketball.
On Tuesday, the New York attorney general began an investigation into the perspective employees who won a lucrative payout based on the inside information not available to the public. Word of the inquiry came about when DraftKings & FanDuel actually allowed their employees to play on each other’s sites with the unpublicized information. Due to illegal activity, many primary sponsors have begun distancing themselves from lucrative advertising and sponsorship deals. Last week FanDuel has already announced that they had already tried to permanently prevent its employees from playing daily fantasy games on their own sites or any other company’s site.
In addition, ESPN and the NFL has already reduced its association with DraftKings in lieu of the scandal and declined to comment. DraftKings announced in a statement that they will fully cooperate with the inquiry.
Regardless of how you look at it, fraud is fraud. These employees at DraftKings & FanDuel kept important information from the public and leveraged their knowledge to capitalize on their own greed. This type of transparency and credibility that these sites use to have is now considered problematic.
To fix this, the inquiry needs to hold both the sites and those accused at fault. In addition, the overall operations and logistics for an employee responsibilities should be thoroughly reviewed so that this does not happen in the future. Any easier punishment could reinforce this type of negative behavior to happen again in the future.