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DraftKings Employee With Illegal Inside Information Wins $350k On FanDuel
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Things are about to get really serious in the land of fantasy sports. Specifically at the multi-billion dollar industry known as Fan Duel and Draft Kings. On Monday, the two major fantasy sports companies were prompted to release a statement defending their businesses’ integrity after allegations of insider trading where employees of the companies were using information not accessible to the public.
The story broke after one of the employees of Draft Kings admitted last week that to inadvertently releasing data before the start of Week 3 of the 2015 NFL season. The employee, that same week won $350,000 at a rival site, Fan Duel.
The two rival companies released this joint statement regarding the manner:

Nothing is more important to DraftKings and FanDuel 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. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.

However, we continue to review our internal controls to ensure they are as strong as they can be. We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love.

How does this give an advantage to the player? It’s simple, winning a contest like “Millionaire Maker” which has hundreds of thousands of contestants, is less about buying up the best players than about find market inefficiencies and selecting players who will help the fewest amount of our competitors while running cheap relative to their production. So, when you select your lineup, you have to try to determine both the bargain value and how under-the-radar your lineup will be.
Now if you have this information ahead of time as some of the DraftKings reportedly did or do, you have a massive advantage over your competitors. Now the DraftKings employee who had possession of this information went and played a similar contest at FanDuel, the rival company and took second place and $350,000 from a $25 bet. DraftKings employees are prohibited form playing their own daily fantasy games, but are allowed to play freely on other sites. This is a significant issue because both sites both sites reportedly have similar game structure and lineup data.
Now there isn’t any news of this is something that could be what’s called “insider trading” but it is a sketchy situation given the advantages it gives to someone in a skill-based competition as Daily Fantasy Sports are classified as by the Fantasy Sports Trade Association (FTSA).

You know this is a big story, when Mike Fransesca starts his daily radio show with the writer from the New York Times.

FanDuel and Draft Kings need to show they are protecting the pool of players and money from being tampered with. That's the most important thing. This guy that supposedly had insider information and won on another site is a pretty silly accusation, in my mind. Even if he knew what players others were playing in their starting lineup, how exactly does that help him win anything? The only thing that would concern me is, what controls do they have in place and how can they prove that employees or executives aren't adding lineups at 3pm on Sunday. That's all that matters to me. Knowing what players others are starting is a concern that should be stopped, but that is not insider trading. What is the difference with that and going to the race track and knowing the odds on a horse before placing your bet? Yes, if one person knows who is being played and plays elsewhere, its wrong. It should be opened up to everyone or no one. My biggest concern, since the beginning with DFS, was lineups being added after games have started.

I just hope that these issues don't effect year long games where we know the competition lineups and rosters from the beginning of the year. Year long fantasy should not be lumped into the paramutual wagering happening at DFS.

New York sports radio killing df games. Bringing up idea of people putting in lineups after game time. Drawing alot of negative attention.

This all is very bad for fantasy sports I think. Maybe it is what needed to happen to straighten it out and get the right systems in place. It's kind of ironic to me that all of the millions of dollars spent in advertising might have gone right out the window because some basic oversight / controls aren't in place. Do the owners of these two companies even know how to run a company this size? Maybe it all has grown too big too fast and we are seeing some of the consequences. I worry that more trouble is ahead. When millions of dollars are at stake it doesn't take a genius to figure out that there are probably people working the system one way or another. Anyone catch Tommy G last night? I did a "did I hear that right?" when he started talking about his relationships with the folks at the two big companies.

JohnP wrote:Anyone catch Tommy G last night? I did a "did I hear that right?" when he started talking about his relationships with the folks at the two big companies.

What did he say?

Tom Kessenich wrote:

JohnP wrote:Anyone catch Tommy G last night? I did a "did I hear that right?" when he started talking about his relationships with the folks at the two big companies.

What did he say?

He was defending the Ethan kid, said he knows him well, considers him a friend, etc. and then said something about he goes right to the top at these companies. I am sure you can listen to it on the xm on-demand stuff. I am surely not in any way making accusations of anyone, it just made me think that there could be possible abuse of relationships and information. What is stopping the $15 / hour data person at FD or DK from sending over a file of the highest owned players in the million (or is it billion now?) maker tourney over to someone as to gain an advantageous in a contrarion play? I am not even real sure how that all works or what the advantage is and maybe that is a bad example. Just saying - what is in place to stop these types of things? I hadn't even really thought much about it until he started talking about it.

ESPN.com's Darren Rovell does a nice job of breaking things down here:

http://espn.go.com/chalk/story/_/id/138 ... FSDKPrimer

JohnP wrote:

Tom Kessenich wrote:

JohnP wrote:Anyone catch Tommy G last night? I did a "did I hear that right?" when he started talking about his relationships with the folks at the two big companies.

What did he say?

He was defending the Ethan kid, said he knows him well, considers him a friend, etc. and then said something about he goes right to the top at these companies. I am sure you can listen to it on the xm on-demand stuff. I am surely not in any way making accusations of anyone, it just made me think that there could be possible abuse of relationships and information. What is stopping the $15 / hour data person at FD or DK from sending over a file of the highest owned players in the million (or is it billion now?) maker tourney over to someone as to gain an advantageous in a contrarion play? I am not even real sure how that all works or what the advantage is and maybe that is a bad example. Just saying - what is in place to stop these types of things? I hadn't even really thought much about it until he started talking about it.

It does bring alot of cause for suspicion..they definitely need to be forthcoming and transparent. For instance, on fanduel u can't view wins, losses, money won on other user's profiles. However, independent websites like fanduel fishfinder can pull up that info and even charge for it. How is that possible..has to be somebody working within fanduel to release that info to independent parties..and if not doesn't look good their info can be hacked into...either way very fishy and alarming.

1. It wouldn't surprise me if employees are using non-public information for their own benefit
2. It wouldn't surprise me if teams were added after the deadline
3. It wouldn't surprise me if there are "house teams" when overlay exists. The site pays for the team through a "dummy owner" and the profits are split between the site and "dummy owner"

Sometimes the appearance of impropriety can be worse than actual misconduct.