A Fantasy Sports Control Agency

As of recent, daily fantasy sports providers such as FanDuel and DraftKings have been under public scrutiny after several lawsuits have been filed against them.  These lawsuits claim that employees of FanDuel and DraftKings used nonpublic information in order to create a more profitable fantasy line-up and used the line-up at their competitors website.  This is what is known as "Insider Trading" and so far DraftKings employees have won more than 6 million dollars by doing this.  It's safe to say there will probably be more lawsuits filed against these multi-billion dollar corporations, but the real question is how will they regain the fantasy player's trust?

Well according to an article in the Wall Street Journal, these fantasy sports providers plan on creating an outside control board known as the Fantasy Sports Control Agency to ensure ethical behavior in the industry. This control board is led by former Obama administration official, lawyer Seth Harris, (Deputy Labor Secretary from 2009-2014).  Mr. Harris explains "We’re going to develop a set of industry standards,” by "ask[ing] all of the companies that are engaged in cash games to establish controls, processes, and leadership that will ensure compliance with those standards."  Even DraftKings Chief Executive Officer Jason Robins agreed that this new control agency “will help our industry establish best practices” and will give a level playing field for customers.

So what would happen if these companies or their employees were caught cheating again?  Mr. Harris said they would have strict controls such as audits and an enforcement mechanism to deal with misconduct. Depending on the severity of misconduct, legal actions may be used as well.  The creation of this control agency wouldn’t affect the continuing investigation of the insider trading lawsuits filed against the companies, but it is the right step in moving forward for these companies and maintaining a healthy relationship with their customers.

Who plays fantasy football?

Online fantasy sports, specifically football, is one of the largest growing industries in the United States over the past 10 years.  Fantasy sports providers such as DraftKings and FanDuel have had cash inflows of BILLIONS of dollars annually.  Even with a recent lawsuit involving both company's employees being investigated for insider trading, they are still growing in popularity!  So you might be asking yourself, "Who the heck are all these people playing fantasy football?"  Posted below is a graphic that will provide you insight on the growing population of fantasy sport players.

Fantasy Football: Where Entertainment meets Money.

Ever since the invention of the internet, mankind has been seeking two things from this revolutionary technology; ways to entertain one’s self and ways to make money.   So began new forms of entertainment including the popular Netflix, Spotify and Pandora and different forms of ecommerce, ranging from email providers to online retailers and online news subscriptions.  One of the most popular forms of entertainment that begin with the internet was Fantasy Sports leagues, in particular football.  These leagues consist of a player hand selecting different football players from different teams who play different positions in hope to obtain more points than their competitors.  These leagues originally were played amongst friends, co-workers or acquaintances and would last the duration of the sport’s regular season. Most of these fantasy leagues were played for money, where a single commissioner would be in charge of collecting the fee and payouts at the end of the year. 

This would all change when companies like FanDuel and DraftKings introduced a new revolutionary idea; daily fantasy sports competitions.  This new type of fantasy competition allows you to play in new competitions and tournaments each week, allowing the player to choose new players in each league and receiving payouts if they win each week rather than at the end of a sports season.  It also allows the user to spend as much money and enter as many competitions as they please.  There are different types of tournaments such as first place wins all, top 10%, double up, triple up and 50/50 leagues so the user can comfortably assess how they would like to gamble.

All this seemed to be fair until earlier this month a lawsuit had been filed against both DraftKings and FanDuel for insider trading.  It was discovered that employees at DraftKings made over 6 million dollars by using nonpublic info in their databases to help them choose higher scoring players and compete in FanDuel (since they were not allowed to play at their own company) and vice versa.  This leads to these employees having an unfair competitive advantage when playing in these tournaments and could potentially be the reason you lost money on these sites! So if you think you might have lost a couple games playing on these daily fantasy sites, now might be the time to consider filing your own fantasy football lawsuit.

NFL talks Fantasy Football

Earlier this month, a class action lawsuit has been filed against daily fantasy sports providers DraftKings and FanDuel for insider trading.  The Securities and Exchange Commission defines illegal insider trading as “buying or selling [of] a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.”  So when fantasy football player Adam Johnson filed his lawsuit, he claimed that the companies “had screwed participants by allowing employees with access to inside information to play the games at rival companies.” Essentially employees at DraftKings and FanDuel were able to access company’s databases with the most recent data on every player in every contest and able to use this nonpublic info to make better and higher-scoring line-ups. They would then take this information and use it at their competitor’s website to win money.  It’s been reported that employees at DraftKings have won at least 6 million playing FanDuel. 

With fantasy football being the most popular fantasy sport on both sites, NFL commissioner Roger Goodell has expressed his and the NFL’s concern over the daily fantasy sports controversy. Goodell made a point that since theses leagues are based on picking individual players from different teams and putting them together, that “It is hard to see the influence that it could have on an outcome of a game.” He then states “And it’s not based on the outcome of a game, which is what our biggest concern is with sports betting. So our position continues to be that way. But we recognize some states consider it legal, and some don’t. We’ll follow that law.” Daily fantasy football leagues are legal in all states with the exception of Arizona, Iowa, Washington, Louisiana and Montana.

Both DraftKings and Fanduel have spent millions of dollars on advertisement at NFL stadiums and live television broadcasts. Although the NFL doesn’t directly have any financial ties to these fantasy sports provider, 28 of the 32 NFL teams have either advertising or sponsorship deals with DraftKings or FanDuel. When Goodell was asked if the league would reconsider allowing teams to accept ads or sponsorships from these companies, he responded “Consumer protection and making sure companies operate responsibly is important to us” he then states “We’re going to want to make sure that our fans are protected, the consumers in general are protected, and that we expect anyone that’s involved in any way — whether this is an advertiser or a sponsor or any other relationship — we do that in a responsible fashion. And I hope they will do that.” In general, NFL commissioner Goodell does not believe the scandal will compromise the integrity of the league.