Why The DraftKing Mishap is a Call For DFS Industry Regulation

Recently, player lineup data from DraftKings was leaked, which has caused industry-wide talks that range from player data to employee access to the integrity of fantasy sports. Additionally, the effectiveness of semi-self-regulation in the Daily Fantasy Sports industry has come into question.

The Overview

Last week a DraftKings employee accidently released player data on DraftKings’ high-roller contests, The Millionaire Maker, before any of this week's NFL games started. This data revealed that certain players were extremely prevalent in the contest’s submitted lineups. For instance, it showed that Julian Edelman, the Patriots WR, was the most commonly selected player across all the lineups, as he appeared in a whopping 37 percent of all the entered lineups.

It is quite common for this type of data to pop up. However, never before has it been submitted before all the games in a contest have begun, and all of the lineups have locked-in officially. On DraftKings, having access to this sort of data before a contest starts gives players an enormous advantage over others who have not seen the data.

To add to the controversy, the culprit of the early posting, Ethan Haskel, DraftKing’s content manager, was the winner of a $350,000 prize at DraftKings’ rival site, FanDuel, the week that the data was leaked. Although, no accusation has been made as to whether Haskell’s FanDuel win had to do with his access to the data, many are accuse him of wrongdoing.

Haskell, as well as others involved, have fully denied that they’ve done anything wrong. However, the mere facts of the situation have showcased that there are problems within the fantasy sports industry. Both industry experts and players are questioning who within DFS companies have access to data that could give them a competitive advantage, and what safeguards there are to ensure that there is no employee abuse. Lastly, major questions are being asked as to whether the DFS’s self-regulation needs to change to alleviate such threats.

Why Does Access to Data Give Players an Advantage?

Although ownership percentages only make up a portion of useful statistical data for the creation of skillfully crafted Daily Fantasy Sports lineups, it is still a tool that players can use to get a leg over others. The best DFS players attempt to predict ownership percentages by looking at data from the past, as they can then try to gather intel from the information. Because of the sheer number of players on both FanDuel and DraftKings, it is typically quite difficult to win tournaments when using players that have a high ownership percentage. By finding out the players that have lower ownership percentages, but still a significant upside, players can excel at their tournaments. However, if players know the data beforehand as to which players are being used the most, they can easily enter cash games with positive expected value.

What Questions Must Now be Answered by DraftKings?

DraftKings and other DFS providers must now respond to some major questions, such as:
• Who should be able to access critical data?
• What other sorts of data can employees have access to that they may use to help them draft lineups.
• What are safety measures being taken to keep this kind of data from leaking again?

Insider Trading Threat

There is also the possibility that this data can be used for insider trading, even if an employee is not using it to play at another DFS website. Many argue that if the information is released underground by an employee, then it is equivalent to insider trading. Daniel Wallach a gaming and sports lawyer stated,

At a minimum, DFS employees and insiders should be restricted from playing on any site (not just their own), and access to this type of information should be limited only to the most essential of personnel.

Can DFS Employees Play on Other DFS Sites?

There are no overall policies from any DFS company that restricts employees from playing on DFS sites. In fact, many employees do dabble in fantasy sports gameplay from other websites. At DraftKings, there doesn’t seem to be a clear policy. However, one DraftKings employer, Will Hester Tweeted that at DraftKings, employees are explicitly told not to use other DFS websites, and would be immediately fired if they were caught doing so. This indicates that Haskell should not have been able to play on FanDuel.

The Regulation Issue

Daily Fantasy Sports companies legally operate within the United States and are allowed to exist outside of the regulatory agencies’ scope that covers other betting products like sports betting, poker, and horse race wagering. This makes the fantasy sports industry self-regulated for the most part. It also means that there are no industry-wide rules that govern DFS companies for any given situation, and there is no mandated accountability or transparency. As of now, there is also nobody that works to craft policy that would prevent any future issues from occurring within the industry.

High Time For a Regulatory Body

Currently, the only source of information on what happened is from DraftKings. However, with a regulator, such as the government or a third party, some oversight of the issue would be in place to look into data access and game integrity. Many experts think that DraftKngs, as well as other DFS websites, should not be the only arbiter of their own integrity.

Reactions From FanDuel and DraftKings

FanDuel and DraftKings released a duel statement:

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.

Did Haskell Have Access to Data That Helped Him Win at FanDuel?

There are reports that Haskell did not in fact have access to the data that he leaked before he created his lineup on FanDuel. Instead, he is said to have received the report after his lineup was locked into FanDuel. That does not mean that there is not validity in the debate that is currently happening about what sort of data DFS employees should receive, and whether or not they should be able to play on competitors’ websites.

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