DraftKings "Insider Data Leak" Scandal Reports

For those that don't know over the past couple days a story of Ethan Haskell (employee of DraftKings) won $350,000 on FanDuel. Ethan works for DraftKings Playbook, which is the online blog for DraftKings. He's a writer and one of his posts is displaying the ownership % levels for the Millionaire Maker. You can an example of the post here - http://playbook.draftkings.com/nfl/millionaire-maker-percent-owned-week-3/

This week, he posted ownership % levels that included players who hadn't played yet. After the Sunday 1pm games, he posted ownership level %'s for players in the Sunday and Monday Night games. A user pointed this out and Ethan apologized and said it was an innocent mistake and it wouldn't happen again. However, the story didn't die there.

Legal Sports Report ran a number of stories on it and started promoting this on Twitter. Big media caught on and now a number of larger sites have been calling this a scandal. These sites include ESPN, Deadspin, USA Today, New York Times and more.

So, why is this being considered a scandal? Any FanDuel user can play in Thursday FanDuel games and see ownership levels for Sunday players on FanDuel. This information is actual ownership % levels on FanDuel, not DraftKings. Why is Ethan Haskell or any DraftKings employee knowing DraftKings ownership level % more valuable than actual FanDuel ownership %?

Facts:

- Up until now, employees of DFS sites are able to play on competitor sites. They are not allowed to play on the site they work for.

- Ethan posted ownership % for games that had started and for games that hadn't started to DraftKings Playbook. He posted ownership %'s for Sunday and Monday Night games on DraftKings prior to these games starting.

- Ethan has won significant money in DFS prior to working at DraftKings. He's an accomplished player.

- On DraftKings you can make "late swaps", meaning you can swap out players prior to games being started.

- On FanDuel, you can not make "late swaps"

- DraftKings and FanDuel don't have the same ownership % in their contests.

- DraftKings released a statement saying that Ethan Haskell did not publish ownership levels at DraftKings prior to the FanDuel contest starting.

- DFS site have currently banned their employees from playing on any DFS sites.

Important Questions:

- What happens next? Does this lead to regulation?

- Should DFS employees be allowed to play on any DFS site?

- Why did Ethan Haskell have access to DraftKings Ownership level %'s prior to the Sunday Night and Monday games starting and if so, is this a competitive advantage?

- How is this different than knowing Ownership level % on Thursday's on FanDuel? Any player can go on FanDuel on Thursdays and see ownership level % on FanDuel and utilize this information for Sunday's games. DFS websites regularly publish this information.

- Did Ethan have the onwership level % from DraftKings prior to entering his FanDuel contest?

- Is this ownership level % being shared with any others?

- Is this the tip of the iceberg or speculation? No reports have come out that Ethan had any information prior to the games starting and no reports have come out stating that DFS employees have an unfair advantage. It could, but in this case, it's all speculation.

Personally, I think some regulation in DFS will help the industry establish legitimacy and ensure fairness. I'm not sure that DFS employees/contractors have an unfair advantage yet other than many of them living DFS all day, every day. The DraftKings Pros are an example of this. They are really good at DFS and have been some of the forerunners in the industry. They are also under the umbrella of DraftKings in some way. As long as they aren't getting private information, I don't see why they shouldn't be able to play on other DFS sites.

I will wait for the 3rd party reports to make a broader conclusion about this particular situation. However, I do think a rule that ensures DFS site employees that play DFS don't have access to ownership level reports. I think this is easy enough to implement and prevents this issue from arising.

People are running with this speculation and condemning all of DFS before having the facts. It's premature to come to any conclusions. However, I do think this is a good time for this discussion. I hope we can come up with a solution that keeps DFS going strong and ensure fairness.

What are your thoughts?

I don't think any wrongdoing happened, but I also understand how this appears to someone from the outside looking in.

The most unsettling part comes from DraftKings response. They should be able to show a timestamp from the email sent to Ethan, thus eliminating the accusations that he was given this information prior to lineups locking. Seems like a simple fix to debunk the slippery slope of media outlets trying to blow this out of proportion. Considering the stakes, I'm surprised they haven't released this.

Knowing Ethan he did nothing wrong but changes do need to be made. Some regulation will be good and I feel is necessary.

MLB did make a statement earlier on the situation as well. I am really interested to see how that plays out.

The bigger issue I have had with this week is the site issues with UFC on DraftKings and FanDuel allowing multiple entries in single entry contests.

I have zero issue with Ethan's winnings, however this does shine light on what information is available to some who do play on other sites. Does it stop with percentages, or can employees have access to all sorts of things, and play on other sites?

We are likely not going to have chance to know if he had this info prior, because of the damage it would cause if they were honest. Kind of like a big oil company just coming out and saying they knew about the tanker issues before the oil spill occurred.

I don't play Thursday contests, but I believe now FanDuel blocked out the %'s for players on Sunday/Monday? Correct me if I am wrong, so the advantage would be there if that is the case.

As much as I am for little regulation in most sorts, I do believe the industry needs some boundaries, which I wasn't for a few years ago. Now with massive piles of cash involved, things always tend to take a turn for the worse when the $ flows in.

I have an issue with big media coming in and running their usual BS stories without facts. The terms "betting" and "insider trading" are there to generate clicks, and also put a black eye on the industry. Just not a good look when you are on the radar of the government, who clearly have nothing better to do.

If employees have access to any sort of info that gives advantage, they should not be playing anywhere. It should be noted for whoever works there of now, and to future employees. It is up to them to decide if they want to leave/turn down the job, or keep the job and not play.

I do think there is a competitive advantage to having ownership levels before contests, from a game theory standpoint. Even though pricing differences and lineup differences (the presence of a flex on DK, for instance) will skew ownership levels between sites, it can't hurt to know ownership levels of players when making your own roster decisions. In my mind, the best thing to do in order to ensure there's no unscrupulous behavior, real or perceived, is to prevent any employees working in DFS who also intend on gaming from seeing ownership levels. I don't believe that simply working in the DFS industry should preclude someone from playing, but I do think anything that can be done to avoid a perception of shady happenings is a MUST. As you've said, I'm going to reserve full judgment of the happenings until more facts are revealed, but this is an eye opener for the burgeoning world of DFS to be careful. There's no reason to give those opposed to DFS any ammo for attacking its legitimacy.

Whether this was legitimate or not, the proverbial "hammer" is eventually going to come down on DFS I fear. ESPN already said they are pulling their DK promotions, and Disney owns a piece of DK and almost all of ESPN. The same thing happened with online Poker, and as the football season started, you saw more and more critical articles come in about daily fantasy. Its probably just a matter of time unfortunately. The massive ad campaigns have really brought it to the mainstream, and many people are probably feeling that its a bit shady. Also, FanDuel's PR girl happens to be someone who was involved in a giant Twitter scandal not that long ago, which doesn't help.

@jasonG4S - Will verify FanDuel is still running this on Thursday.

@Lox81 - I see that. Article is here - http://money.cnn.com/2015/10/06/media/espn-draftkings-ads/ It was unclear to me as to whether they are pulling all "sponsored by" mention at this time within their segments, but either way, this isn't good for DK or DFS in short-term.

This was just released - http://deadspin.com/here-are-the-letters-new-yorks-attorney-general-just-se-1735097526

Im going to be pissed if they get rid of DFS.

I still don't know the reason online gambling is illegal, other then the government likely can't find a way to get a piece of the action.

Unfortunately, I think the days are numbered. :\

Wow, that letter probably means they have had their eye on this for a while. It sucks. I'm a passive player, play in a few contests a week and have fun. Of course I try my best to win, but I know the odds are against me. Especially when I try to play a H2H matchup and realize almost every person on DK with a contest posted is rated on rotogrinders. But thats my choice, and it should be. I almost always come out even or a little ahead or behind for the week, but it makes it more fun than just traditional fantasy leagues. I do realize there are a lot of people that either have made or are trying to make this their primary vocation, which is what I think the Feds and regulatory bodies have a problem with. They never meant for the fantasy sports loophole in the gambling legislation to get people into doing this professionally. It was meant to make it so leagues between buddies weren't illegal when they wired over their $100 for the season's dues. They probably feel it has gone too far, especially if there is cheating using ownership %'s. I don't think anybody would want that, and hopefully its not going on. But with the ad campaigns that outnumber McDonald's 100 to 1 at this point, the lawmakers were bound to get involved.

Yeah, will be interesting to see how this plays out. With today's media blitzing of stories based on speculation, before any hard evidence is found, this could be a flash in the pan and not be discussed in 3 weeks. I would like to think DFS won't be wiped off the map in one fell swoop. There is a lot of money and big organizations backing DFS, so hopefully they have money it takes to counter balance this bad and speculative press.

However, I'm not sure that will happen with the advertising everywhere. It will still be in everyone's face. My hope is that regulation does come down that doesn't compromise the game and actually makes the playing field more fair. I really liked what @rayofhope had to say in terms of higher stakes players not playing in contests for $5 entry or less. There is a lot to be done that can help. The primary issue is that DFS sites need to continue bringing in as much cash and players as possible. In order to do that, they need to put out big contest payouts, fill those contests by allowing massive multi-entries and continue to advertising. Something has to give....

Articles like this

http://ftw.usatoday.com/2015/10/this-is-the-beginning-of-the-end-for-draftkings-and-fanduel

are not helping.

I'm staying out of the speculation for the most part, but I'll say a few things here. First off, I don't think there was any wrongdoing, and am confident that the 3rd-party investigation teams will conclude the same. Second, I think the hysteria has been blown way out of proportion. I don't envision a scenario where DFS would just get "shut down" or cease to exist as a result of one mistake, whether is was an honest mistake or not. I think the most likely scenario is government regulation coming sooner than it was going to be coming. They'll take their cut off the top, we move on with business as usual. The big losers here are employees of DFS sites who won't be allowed to participate in contests anymore. Tough decision on their part to give up playing or give up work with the sites.

This is good news from the Massachusetts Attorney General! http://www.boston.com/business/news/2015/10/07/mass-draftkings-not-looking-shut-them-down/XjfYssXgrzqmWYcJFQcCMP/story.html

This guy deposited $100 and is starting a class action suit - http://espn.go.com/chalk/story/_/id/13840184/class-action-lawsuit-accuses-draftkings-fanduel-negligence-fraud-false-advertising

This is getting stranger by the minute.

http://www.businessinsider.com/sports-gambler-haralabos-voulgaris-daily-fantasy-sports-2015-10

Posted here per Admin request

@odieman1231 - what he says is true about "professionals" entering tons of lineups and I do think limiting multi-entries is one form of regulation that will likely take place. However, what I do think will be a consequence of this is smaller prize pools and larger rake %. "Pros" right now are accounting for a large percentage of entries fees and are helping drive these large prize pools.

What's interesting is thus far, I haven't see one "pro" win a $1 million prize in NFL and we've gone through 4 weeks. What's different this year than in years past is that the number of total entries are much larger. It'll be interesting to see how the large GPP continue to play out. I think "pros" are definitely better at DFS, but as we've seen non-pros win millions. Stepping back from this and taking a broader picture, I think it depends what you want out of DFS. If you are trying to make a living playing GPP's in DFS (very few are successful), the options are likely playing against "pros" with multiple entries or playing against "pros" with fewer entries, but smaller prize pools and larger rake. The type of player I am, I personally want to play in million dollar tourneys and if "pros" want to fuel that prize for me, go for it. I see it as a challenge and want to get better to win.

I do agree that people need to know what they are getting into and that's their personal responsibility to research and educate themselves.

With Nevada ruling DFS out....what can we expect for the future as states will likely follow suit? Should I be worried about cashing out?

I don't imagine anything will happen overnight, so I wouldn't race to cash out yet. Then again, I'm also not an authority figure on the subject, but that's my takeaway at the moment.

@odieman1231 - it's up in the air at this point, but hopefully some good news comes out soon in regards to the NY Attorney findings. If DFS is found to be illegal, I think it will be a different process than what happened with Poker. Poker companies were primarily based overseas and were clearly breaking laws. It is far from clear that DFS is breaking any law and DFS sites are working with officials to provide a better, safer and regulated game.

I don't know what will happen, but if DFS survives, I think it's going to be regulated in a way that ensure fair play (there has been nothing yet that has shown there has been unfair play) and satisfies federal law to the fullest and most state laws. There will inevitably be a number of states that aren't okay with DFS and I think this will mean smaller prize pools and larger rake %. Instead of $2 million first prize, maybe we're looking at $1 million or $500K.

I really hope DFS and season long comes through this stronger for the long-term. I love watching sports, but it just wouldn't be the same without fantasy sports.

In terms of cashing out, it's entirely your call, but I haven't heard of any DFS site not paying out players. You may want to see if there is any news in your state regarding DFS so you feel more comfortable. I've been told a number of states are curently writing legistlation to boldly state it's legal. Hopefully, you're in one of those states.