DraftKings and FanDuel, prominent competitors in the emerging daily fantasy industry, have been forced to explain and amend employee policies after The New York Times reported that Ethan Haskell, a "midlevel content manager" at DraftKings, won $350,000 playing a FanDuel contest during the NFL's Week 3. Employees from both companies were always forbidden to play for money at their own company, and now that restriction applies to playing at a competitor’s site, as well.
Allegations that Haskell may have used "insider information" using DraftKing’s data to inform his lineup choices on FanDuel were fueled when Haskell prematurely published information about how frequently football players were owned in DraftKings’ "Millionaire Makers" game.
This information, published on DraftKings’ site and shared on its Twitter account, is usually not shared until all of the NFL players available to be selected have started their games. But in an apparent mistake, Haskell published the information while the NFL’s first round of afternoon games were still ongoing, and before the 4 p.m. ET games had kicked off.
DraftKings pulled its advertising off ESPN on Tuesday in response to the scandal, an ESPN spokesman told USA Today. It's not clear when the company's advertisements will return to the network. ESPN has also made the conscious decision to scale back graphic and scripted promotions for DraftKings within its own programming in order to avoid the appearance of a conflict of interest.
Even though rosters were locked for the "Millionaire Makers" contest as soon as the first games started, knowing the popularity of NFL players selected in the afternoon games could offer a theoretical advantage to those participating in other contests involving only the players in the afternoon games.
Knowing how frequently an NFL player is being used in daily fantasy games offers a potential advantage because it could allow someone to put together a more distinctive lineup. And while DraftKings and FanDuel have slightly different scoring systems, player salaries and lineup structures, having this information before it's publicly available at one company could help someone infer popularity at the other.
DraftKings denied that Haskell used this information to set his winning lineup, in a statement released Monday:
"For the last several days, DraftKings has been conducting a thorough investigation, including examining records of internal communications and access to our database, interviewing our employees, and sharing information regarding the incident with FanDuel.
"The evidence clearly shows that the employee in question did not receive the data on player utilization until 1:40 p.m. ET on Sunday, September 27. Lineups on FanDuel locked at 1:00 p.m. that day, at which point this employee (along with every other person playing in a FanDuel contest) could no longer edit his player selections.
"This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup. Again, there is no evidence that any information was used to create an unfair advantage, and any insinuations to the contrary are factually incorrect."
Even though DraftKings maintains its employee did nothing wrong, the perception that employees could abuse their access to lineup information to profit at a competitor's site threatens their trust with consumers -- and makes some of their high-profile investors uneasy:
MLB, which owns a piece of DraftKings, said they were surprised employees could play pic.twitter.com/x2YsJwJJ7D— Darren Rovell (@darrenrovell) October 6, 2015
In response, DraftKings, along with FanDuel and the Fantasy Sports Trade Association, announced in a statement that employees will no longer be allowed to play online fantasy sports contests for money:
"The Fantasy Sports Trade Association (FSTA), DraftKings and FanDuel have always understood that nothing is more important than the integrity of the games we offer to fans. For that reason, the FSTA has included in its charter that member companies must restrict employee access to and use of competitive data for play on other sites.
"At this time, there is no evidence that any employee or company has violated these rules. That said, the inadvertent release of non-public data by a fantasy operator employee has sparked a conversation among fantasy sports players about the extent to which industry employees should be able participate in fantasy sports contests on competitor sites.
"We’ve heard from users that they would appreciate more clarity about the rules for this issue. In the interim, while the industry works to develop and release a more detailed policy, DraftKings and FanDuel have decided to prohibit employees from participating in online fantasy sports contests for money."
Disclosure: SB Nation has a partnership with FanDuel to produce content about daily fantasy sports and advertise their games.