Fantasy Sports (Pt.1): The New Threat – Insider Trading

Posted on 10-20-2015 by
Tags: Latest Headlines & Stories , trending news

Fantasy sports, especially football, has become an overnight phenomena. This hobby has gone from being a weekly matchup to creating “daily” leagues that generate billions of dollars thanks to companies such as DraftKings and FanDuel. While each of these companies has been enjoying quite the success, both of them now find themselves in murky waters due to a scandal involving both of the sites.

The Insider Trading Scandal

The scandal, according to the New York Times, involved an employee at DraftKings admitting to inadvertently releasing data before the start of the third week of N.F.L. games last week. By chance, that same employee (a midlevel content manager) won $350,000 at its’ rival site, FanDuel, that same week. This caused many to be suspicious of possible inside trading.

The data that DraftKings’ employee, Ethan Haskell, released showed which particular players were most used in all lineups submitted to the site’s Millionaire Maker contests. Usually, this data isn’t released until lineups for all games are finalized. Getting this kind of information early can give a player a huge advantage. It could lead an entrant change previous decisions for tactical reasons. This can change the outcome of their matchup, especially if an entrant’s opponents do not have the information at all.

The Implosion of Fantasy Football?

This incident has caused many to question who handles inside information at these daily fantasy sports companies. In fact, Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff sees that as the greatest threat to the newly-booming daily fantasy league industry. Wallach told the New York Times:

“It could imperil this nascent industry unless real, immediate and meaningful safeguards are put in place. If the industry is unwilling to undertake these reforms voluntarily, it will be imposed on them involuntarily as part of a regulatory framework.”

While many fans have been enjoying this booming industry, they shouldn’t get too comfortable with it as it tries to weather its first significant threat.

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