DraftKings and FanDuel, two giants of commercial fantasy sports, have issued a joint statement saying their employees do not use insider information to bet and win in their own fantasy contests. The statement came hot on the heel of news that before the start of the third week of the NFL season, Ethan Haskell, a DraftKings employee, prematurely released data which he used to collected $350,000 on a $25 fantasy pick entry from rival FanDuel.
Fantasy sport experts say this may not be the first time insider information has been used by employees to win big. In response, the two companies say they have banned their employees from taking part in contests on other sites and that they have "strong policies" in place to ensure proper handling of company data.
Writing on a message board, Haskell claimed that he accidently released data prematurely on the company's blog from the lineups of players submitted to the DraftKings site for its Millionaire Maker contest.
Of the incident, Mr. Haskell said, "I've fixed the error and we'll be putting checks in place to make sure it doesn't happen again. I was the only person with this data and as a DK employee, am not allowed to play on the site. 100% my fault and I apologize for any issues."
Although Haskell did not say anything about his $350,000 win, his boss, DraftKings CEO Jason Robins claims his employee won the money fairly and squarely. He says when Haskell received the data when it was no longer possible to change his FanDuel lineup to his advantage. Robin's claim is backed by FanDuel.
Robins went even further to defend Haskell for prematurely publishing data saying the move was unintentional.
"We interviewed everyone involved and they all corroborated what really happened," says Robins. "Mr. Haskell didn't do anything ethically wrong. He made a mistake in his job and he'll certainly hear about it."
The experts say in a fair fantasy world, team lineups chosen by all contestants are not published until after games have started. They say if anyone had advance knowledge of what players others had selected, they could choose different lineups that didn't overlap, giving them a greater chance of winning. They cited as an example that a person knowing the majority of other contestants had picked Aaron Rodgers as their quarterback could pick Peyton Manning, because fewer people had run with him and he would be worth more points.
ilers Research partner Adam Krejcik says “Mr. Haskell's act doesn't suggest that it is a rampant problem but news that it had happened could not have come at a worse time” for fantasy companies. He says lawmakers in Massachusetts, New Jersey and California are considering initiatives to regulate fantasy sports.
"It wasn't like this was pure fraud or money being stolen from other people's accounts," says Krejcik.
The experts say DraftKings and FanDuel which controls 95% of the fantasy market, are valued at $1.2 billion and $1.3 billion respectively. They say both companies being start-ups, claim they have yet to make profits due largely to massive advertising spending to attract customers. Ad tracker iSpot.tv says in just one week in September, DraftKings spent $20 million on TV advertising.
FanDuel reported 2014 revenues of $57 million and awarding $564 million in cash prizes, while DraftKings reported $30 million in revenues with $300 million being given away in prizes. The experts say the companies generate revenue from keeping a percentage of the money contestants pay.