Fantasy sports scandal raises concerns in Congress

by David McCabe - 10/06/15 1:47 PM ET

Congress has concerns about a controversy where an employee of DraftKings, a fast-growing daily fantasy sports site, inappropriately released game data and later won money on a rival site.

Such sites let users build virtual teams of real-life athletes and bet on their performance on a single day.

DraftKings admitted to The New York Times on Monday that an employee had accidentally released data regarding which athletes had been most frequently picked by users for their lineups, before the day’s contests were over.

{mosads}That employee also won $350,000 betting on rival site FanDuel, triggering allegations that he had potentially won money through actions akin to insider trading.

Rep. Frank Pallone (D-N.J.) — the ranking member of the House Energy and Commerce Committee who called in September for a hearing into the websites and their relationships with professional leagues — said he was concerned by the employee’s actions.

“The allegation of ‘insider trading’ by employees of daily fantasy sports operators is a prime example of why we need a Congressional hearing to review the legal status of fantasy sports and sports betting,” he said in a statement.

“Daily fantasy sports is functioning in a Wild West void within the legal structure,” he added.

“With little legal oversight and deep investments into these sites by the same professional sports leagues that oppose traditional sports wagering, these issues are ripe for Congressional review.”

An aide to the Energy and Commerce Committee said the controversy brought up “additional questions” about the websites, but did not indicate whether the attention on DraftKings and FanDuel would lead to a hearing.

“Recent reports raise additional questions about the safety, fairness, and integrity of these new platforms for fan engagement,” the aide said in an email.

“We have a responsibility to protect consumers and ensure that those participating are not being taken advantage of,” the aide added. “Our staff is looking into these issues and we will keep you informed as our work continues.”

Pallone contends that the sites are really venues for gambling, not the games of skill that they claim to be. Fantasy sports are exempt from a 2006 law that effectively blocked many forms of online gambling, because it is considered to be based on player skill.

Both FanDuel and DraftKings are valued at more than $1 billion, and count some sports teams, leagues and broadcasters among their investors. With the exception of the NBA, professional leagues have publicly maintained their skepticism about traditional sports betting.

Prior to the scandal involving the DraftKings employee, which played out over the last week, Energy and Commerce Committee members had suggested that though a hearing was possible, it was unlikely to occur in the near future.

“My sense is that we will do a hearing,” said committee Chairman Fred Upton (R-Mich.) last month. “There’s a lot of things on our front burner right now, but I think this is an issue that we ought to take a look at.”

Among the supporters of congressional action on fantasy sports is Senate Minority Leader Harry Reid (D-Nev.), a former chairman of the Nevada Gaming Commission.

“Some of the owners of those programs know what’s going on in the other, their competitors, and so they can make a lot of money and that’s what they’ve done,” he told reporters Tuesday, when asked whether Congress should examine the industry.

“So the answer is yes, and I think it’s also should be a warning shot to everybody that online gaming is a real scary thing and we better look at all of them.”

– Updated at 4:13 p.m.

Tags Fantasy sports Harry Reid