Daily fantasy sports operator FanDuel said Wednesday it will permanently ban all employees from playing any daily fantasy sports for money and begin an internal probe following reports a DraftKings employee may have had access to unfairly valuable data before winning $350,000 in a FanDuel contest.
FanDuel said in a release there's no evidence showing the contest was compromised or that non-public information was used to gain an unfair advantage. But the New York-based company said it doesn't want to rely only on what it knows right now and wants to rebuild trust with its players.
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FanDuel said it hired former U.S. Attorney General Michael Mukasey to evaluate its internal controls. It is also creating an advisory board led by Michael Garcia, a lawyer who led the investigation into the 2018 and 2022 World Cup bid process then resigned from the FIFA ethics committee in protest over the handling of his findings.
The company's announcement comes after New York's attorney general sent letters to DraftKings and FanDuel Tuesday demanding they turn over details of any investigations into their employees.
While legal in most U.S. states, daily fantasy sports is unregulated, unlike casinos and lotteries. The incident has been likened to insider trading. The internal data, describing how often players are selected by all players in the salary-cap style game, could be used strategically to build a lineup of players with a lot of potential who aren't popular selections among opponents.
DraftKings CEO Jason Robins said in an interview with cable network Fox Business that the employee received the information after his lineup locked on FanDuel, so there was no way he could have used it to gain an advantage. He said the company is open to talking about transparency and has also hired an attorney for an internal investigation.
"It's just unfortunate to me that somebody who was innocent had to be smeared in order to have that discussion," Robins said.
New York Attorney General Eric Schneiderman wants the companies to explain their policies or practices prohibiting employees from playing. Daily fantasy sports participants put together virtual teams based on real players and compete for points based on the players' statistics. Paid contests vary widely in scope and cost, costing as little as $1 to enter but with some players wagering tens of thousands of dollars each matchup.
In the letters, Schneiderman asked for the names, job titles and descriptions of employees who compile and aggregate data including pricing algorithms and athletes' ownership percentages for past contests.
On Monday, DraftKings and FanDuel posted identical joint statements on their websites saying nothing is more important to them 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," they said.
As the controversy reverberated Tuesday, ESPN said it was cutting sponsored DraftKings elements from within its shows. It called the removal a standard procedure when "covering significant news, to avoid any suggestion of influence on our coverage." It said it was not cutting DraftKings commercials.