FBI Investigation Into Daily Fantasy Sports Websites

Both The Federal Bureau of Investigation and The U.S. Department of Justice have opened up an investigation into the legitimacy of the daily fantasy sports industry. Although the situation is still unfolding, we have learned a few things.

The Low-Down on The Investigation

FBI Agents have started their investigation by getting into contact with DraftKings to inquire about their experience with the Boston company. These agents want to know if any employees of DraftKings gave away information that would help people in choosing their draft picks or if they preyed on any players. Both DraftKings and its chief competitor FanDuel has admitted that their employees have played and won large amounts of money on each other’s sites. In fact, many employees of both companies are ranked as some of the biggest winners on their competitors' websites.

The Focus of the Investigation

The inquiry, which was started by Boston-based FBI agents, is mostly focused on DraftKings, also based in Boston. They are looking into whether or not the website accepts and even encourages bets and deposits from states in which Daily Fantasy Sports is not legal. One particularly compelling piece of evidence comes from a post supposedly written by an executive of DraftKings, charged with fostering a broad customer base. The post was written by the executive on a public forum and explicitly taught players how to deposit money and play on DraftKings if they are from countries and states where daily fantasy sports websites are prohibited.

Statement From DraftKings

DraftKings made a statement to the Wall Street Journal on the topic:

It is entirely predictable that the government would follow up on the misleading reports about our industry. We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.

This comment seems to follow a trend in which DraftKings blames inaccurate media coverage of the data breach that occurred earlier this month for the attention of both law enforcement and policymakers. However, many others blame DratKings’ lack of internal controls for the leak. FanDuel did not make a comment on the situation, although they too are part of the investigation.

Other Investigations into Daily Fantasy Sports

There are currently two other investigations into the DFS industry in the United States. The New York attorney general is inquiring into both FanDuel and DraftKings and is expecting both companies to turn in answers to a number of questions. Additionally, a federal grand jury investigation has begun in Florida. There also seems to be an ever-increasing amount of action and talk by varying states on the question of the legality of DFS and what amount of government regulation should be put on the industry.

Actions to be Taken by FanDuel and DraftKings

Both DraftKings and FanDuel have begun to work with the attorney general of Massachusetts, Mara Healey, to create adequate consumer protections. Healey has previously declared Daily Fantasy Sports websites to be legal in the United States.

Healey made a statement concerning working with the two companies:

I think that those who play want to be, and expect to be, assured a level playing field. I think it’s important to me that that is in place.

Conclusion

Time will tell as to whether or not Legislature has a role in regulating daily fantasy sports websites. The goal seems not to ban these sites through federal laws, but to merely put consumer protection laws in place for those people who use them.

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