The last year has seen the daily fantasy sports industry rocket to the moon like few entities in American sport or culture have before. In just a short timespan, DraftKings and FanDuel have become two of the biggest advertisers in all of America alongside the likes of AT&T, GM, and other mainstream companies. You simply can’t escape daily fantasy on a football Sunday as they’ve blanketed the market and struck partnerships with seemingly every sports network, league, and team imaginable. And the money being invested and the money being dished out is hurtling forward at uncountable rates.
But now the daily fantasy sports boom just hit its first major bit of turbulence. Nothing will bring down an industry that is already walking the tightrope of legality faster than allegations of insider trading and that’s where DraftKings and FanDuel have found themselves this week. The revelation that a DraftKings employee accidentally released player usage information early and then went on to win $350,000 at rival FanDuel has brought about questions of DFS employees using insider knowledge to their benefit. The companies involved have said everything is on the up and up, but like any other enterprise where money is exchanging hands, even the potential use of insider knowledge for monetary gain is sure to sound off alarm bells everywhere. If daily fantasy players don’t think they’re getting a square deal, it undermines the entire industry.
Just how serious is this for daily fantasy? FanDuel and DraftKings acted almost immediately to ban employees from playing DFS games at either company. Previously, employees were only banned from playing their own game.
As a side note, it’s interesting to see DraftKings and FanDuel work so closely together on stamping out this fire. One would think that these two competitors trying to fight for the same space would develop a rivalry like Nike and Adidas or McDonald’s and Burger King. But both companies realize that they’re walking on thin ice in terms of the overall legality of daily fantasy and the potential interest congress may have in them. Who even knew there was a Fantasy Sports Trade Association?
The specter of insider trading is a huge threat to both companies and will only increase the pressure on DraftKings and FanDuel for regulation both inside and outside of Washington DC. It’s not an overstatement to say that if an investigation found that insider trading was happening and DFS employees were using this information to win huge cash prizes, it could be a fatal blow. DraftKings and FanDuel had no other choice but to act quickly and implement this ban now. But in light of these developments, it’s a safe bet that the serious inquiries of the true inner workings of daily fantasy sports is only just beginning.