The fantasy sports craze has been growing so much, and so fast, that regulators are still trying to come to grips with whether or not the activity involves gambling.
Daily fantasy football, which is expected to take in $2.6 billion in entry fees on top of $2 billion to $10 billion in ad revenues this year, was accused by some of fostering insider trading last week after revelations that employees of DraftKings were using company information to win millions in competitions on FanDuel. New York Attorney General Eric Schneiderman announced he has launched an investigation into the websites as a result of the allegations.
In the daily fantasy football schemes, fans select from the same pot of players from the 32 NFL teams, but players can be held by more than one individual contestant. Once all participants have selected their players, the organizing companies reveal how many fantasy participants have drafted each individual player.
If a participant has the same players as everyone else, their chances of winning are reduced, which means a participant selecting players that are drafted less often but still could contribute points can maximize their opportunity to win. DraftKings employees allegedly used this type of information from their own site to win big at their competitor’s site.
Last week, a DraftKings employee was revealed to have released information beneficial to fantasy football participants prior to games being played. The employee in question allegedly won $350,000 playing on Fan Duel on the same day. ESPN reported that DraftKings employees have won about $6 million on FanDuel this year alone.
According to the Sports Business Journal, 91 percent of the winnings on DraftKings and Fan Duel go to just 1.3 percent of the users. However, it is unclear what portion of that 1.3 percent are employed by the companies.