Fantasy sports world battles 'insider trading' claims

The lucrative world of online fantasy sports gaming has been forced onto the defensive over allegations of "insider trading" which critics say underscores the need for more regulation in the multi-billion-dollar industry.

In the past decade, fantasy sports websites have become a national obsession, with the numbers of participants skyrocketing from 12.6 million in 2005 to an estimated 56.8 million in 2015.

A proliferation of sites offer fans the chance to make money by assembling fantasy American football or baseball line-ups, which then score points based on the actual performances of real athletes playing each week.

Yet the remarkable rise of fantasy sports gaming has been rocked by claims of malpractice among industry workers after it emerged that an employee from the DraftKings website had won $350,000 on a rival site, FanDuel.

The employee stands accused of using data not available to the general public -- such as information on which players were the most popular fantasy picks -- to help win big on other sites.

- Fraud controls -

DraftKings, however, strongly denied any wrongdoing, saying that an internal investigation had shown that the employee had only received the data in question after he had entered his fantasy line-up on the FanDuel website.

The employee received the data at 1:40 pm on September 27 -- 40 minutes after the deadline for FanDuel team line-ups closed, DraftKings said.

"This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup," DraftKings said in a statement.

"Again, there is no evidence that any information was used to create an unfair advantage, and any insinuations to the contrary are factually incorrect."

Both DraftKings and FanDuel had issued an earlier joint statement assuring that both companies had policies in place to prevent the misuse of information.

Access to data was limited only to employees who needed 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," the statement said.

"Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers."

- 'Clarion call' for regulation -

Yet the company assurances failed to impress advocates of greater regulation.

Chris Grove, of the Legal Sports Report website, said the joint statement from DraftKings and FanDuel should serve as a "clarion call" for swift external regulation.

Grove argued in a post the controversy left unanswered questions "because there's no central force articulating and enforcing minimum standards, no one entity that can credibly describe the state of the industry on these key issues."

"That is simply an unacceptable status quo when millions of players will risk billions of dollars this year on games they've been told -- but can't be shown -- are fair," Grove stated.

The controversy is also likely to amplify calls from US lawmakers to examine the fantasy sports industry more closely.

Last month, Democrat congressman Frank Pallone, a senior member of the House Energy and Commerce Committee, called for a hearing to look at fantasy sports and its relationship to gambling.

"These sites are enormously popular, arguably central to the fans experience, and professional leagues are seeing the enormous profits as a result," Pallone said.

"Despite how mainstream these sites have become, though, the legal landscape governing these activities remains murky and should be reviewed."