[toc]This is an actively edited and updated story that is evolving as new information emerges. Last updated 1151AM PDT on October 19.
The leaking of player lineup data at daily fantasy sports site DraftKings has sparked a nationwide conversation spanning employee access to sensitive player data, game integrity, and the effectiveness of operators self-policing in the DFS industry.
DFS Report was first to report on the issue, which was originally noted in a Rotogrinders thread.
The employee in question was cleared of any wrongdoing in a third-party review that was released on October 19.
The story, in a nutshell
Here are the broad strokes of #DKLeak:
- On September 27, a DraftKings employee inadvertently released data regarding DraftKings’ biggest contest — the Millionaire Maker — prior to the start of some of the NFL games involved in the contest. The data leak was noted that same day on DFS community RotoGrinders.
- The data showed the prevalence of particular players across all submitted lineups for the contest. This kind of data is posted regularly, but never until all games in a given contest have started and all lineups are finalized.
- Access to this kind of data could provide a DFS player with a significant edge over players lacking such data.
- The employee who posted the DraftKings data early — DraftKings written content manager Ethan Haskell — won $350,000 at FanDuel the week of the data leak. There is no indication, evidence, or formal accusation that Haskell’s win was in any way related to his access to data, nor is there any proof that Haskell had access to data at a point that would have provided him with an advantage in the FanDuel contests that week. DraftKings has explicitly asserted that Haskell was not in the position to exploit any advantage as a result of his access to the data. Haskell has generally denied any wrongdoing.
- At the time, employees at DFS operators were generally not prohibited from playing at other DFS sites (DraftKings and FanDuel have since announced a policy prohibiting play by some employees).
- On October 2, DFS Report published the first synthesis of the story.
- On October 5, DraftKings and FanDuel offered their first official reaction to the issue.
- The mainstream media picked up on the story on the same day. The AP was the first mainstream outlet to cover the story, and was quickly followed by a front-page feature in the NY Times.
- Elected officials at the state and federal level issued reactions ranging from the announcement of an inquiry into DFS by New York Attorney General Eric T. Schneiderman, to a call for Congressional scrutiny by Sen. Harry Reid and others in Washington, to the proposal of a hearing for DFS in California by Assemblymember Adam Gray.
- On October 14, the Wall Street Journal reported that the FBI and US DoJ had opened a “preliminary” probe into the daily fantasy sports industry.
Why the question of access to insider data is a critical one
Haskell’s apparent ability to readily access valuable data raises questions about DraftKings’ internal controls. As DFS Report put it:
If this sort of information is stored in advance like this who is to say that the data isn’t available to someone 5 minutes before kickoff of games or 10 minutes before the kickoff or even an hour before the initial kickoff. My point is if the data can be accessed in advance then it is not hard to see it could easily be accessed at other points in advance even before the tournament is live.
If the data is made available, the questions looming over DraftKings – and all operators – include:
- Which staff members, and how many, are seeing data like this or have access to it?
- What other data could these employees access that would be of use in setting lineups?
- What precautions are being taken to keep the data from leaking?
The threat of “insider trading”
Even if a DFS site employee is not playing DFS (at his or her site, or elsewhere) lineup data and other internal operator data would be extremely valuable to DFS players.
Combine that significant value with an environment where internal controls on data access are lax and you risk the functional equivalent of insider trading on the stock market, argued sports and gaming attorney Daniel Wallach:
Do employees of DFS sites play at other DFS sites?
We are not aware of any DFS company that had a blanket policy prohibiting employees from playing on other DFS sites at the time of the incident.
Following the incident, FanDuel and DraftKings announced they were restricting the ability of their employees to play DFS at other sites, and that employees of other DFS sites would be prohibited from playing on DraftKings and FanDuel. Several other operators have followed with similar policies.
How much does it happen?
Anecdotally, the amount of cross-site play by operator employees is substantial.
DraftKings founder Paul Liberman commented in September that the company employs “some people who make significantly more money off of our competitors’ sites than they do working for DraftKings.”
One industry insider who wished to remain anonymous told LSR that “a significant number of the whales at the top DFS sites are employees – often executives – of other sites.”
(From a DFS operator’s point of view, a “whale” is simply a high-volume player that generates significant revenue, not necessarily a winning or losing player.)
Where the story intersects with the issue of regulation
Daily fantasy sports currently occupies a legal space in the U.S. that has allowed the industry to exist outside of the regulatory umbrella that covers conceptually similar products like parimutuel horse wagering, poker, and sports betting.
Operators of DFS sites do not submit to oversight by state gaming regulators, a situation that has generated numerous objections from within the commercial casino industry.
As a result of that status quo:
- There are no formal, industry-wide rules governing this particular situation.
- There is no transparency surrounding the critical questions related to the incident.
- There is no guarantee of accountability – DraftKings is effectively conducting its own investigation.
- There is no body actively working to craft enforceable policy that would prevent future conflicts from arising.
As Seth Young, COO of daily fantasy sports site Star Fantasy Leagues, noted to LSR, “brick and mortar groups in a regulated environment have tight controls on who can access what data. We always talk about how we have been built to address things like this, and other concerns of gaming regulators, etc. There’s a reason this stuff doesn’t come out of our camp, and it’s not because of player numbers.”
“This is, however, another case in point why we license and control our technology,” Young added. “Knowing what I know, I’m not sure how this sort of thing happens by accident, or how deep this integrity issue goes.”
In the absence of an external oversight function, here are some critical questions stemming from the data leak issue that we’ll never have complete certainty regarding:
- How have sites enforced policies that prohibit employees from playing at their home site, using internal data to gain an advantage at other sites, or transferring internal data to individuals outside of the company?
- How many instances have there been where those policies were violated? How many accusations or investigations?
- What was the investigative process for determining whether a policy violation took place?
- How many people have access to competitively sensitive data? How many times has that level of data been accessed by employees? Could employees access data anonymously or through proxy accounts? How difficult would it have been for an employee to share data?
- What percentage of employees / executives from one site have active accounts at other sites?
- When a player hits a big score at a DFS site, does the site investigate him or her for links to employees at the site where the win took place?
- What systems, if any, do DFS operators have for cooperating in order to advance fraud investigations?
In contrast, the regulated NJ online casino industry exists in an environment where state regulators have on-demand access to any and all data related to game play, comprehensive transaction history, and employees.
DraftKings was required to apply for the same type of licensure in the United Kingdom as sports betting operators bet365 and betfair, as daily fantasy sports falls under the purview of the UK Gambling Commission.
The role of the Fantasy Sports Trade Association
The FSTA – the primary trade group for the DFS industry – does have a “Paid Entry Contest Operator Charter” that serves as the only external guidelines for DFS operators. FSTA board members include the CEOs of DraftKings and FanDuel; FanDuel CEO Nigel Eccles was an author of the charter.
The charter includes a section dedicated to game integrity:
The signatory company will ensure employees or other persons connected to the company with access to confidential player information (such as line-ups) will not:
- Play on their own games (apart from for testing purposes or in private leagues)
- Use confidential player information to gain an advantage playing against players on a different site
- Share confidential player information (such as win rate) to anyone outside of the company
Note that the FSTA considers lineups to be “confidential player information” and that the leak appears to be a clear violation of the FSTA charter.
But what’s actually behind the policy? The FSTA itself makes it clear that the body isn’t meant to serve as an enforcement apparatus. From the charter:
Conforming with the above should not be viewed as compliance with the law, and the FSTA is in no way certifying such compliance of member companies. Companies should procure and adhere to legal advice regarding their games from skilled, experienced counsel of their choice
The FSTA is not undertaking to audit or regulate member companies. Rather, this code is designed to foster proper behavior and allow the FSTA to exercise discretion and take action if it so chooses should it learn that a member company is not adhering to the principles set forth above.
Also, if you violate the charter, the only penalty would be no longer having membership in the FSTA, which is nowhere near what the penalty would be for an infraction regarding game integrity that would result under regulation.
Official statements from key stakeholders
DraftKings, FanDuel, and the Fantasy Sports Trade Association
Here is a complete timeline of responses from DraftKings, FanDuel, and the FSTA.
NBA on DFS: “We have been advised all appropriate actions are being taken to maintain the highest level of integrity for fantasy players.”
— David Payne Purdum (@DavidPurdum) October 6, 2015
Major League Baseball
“Major League Baseball has a policy that prohibits players and employees from participating in fantasy baseball games in which prize money or other things of value are available to participants,” MLB said in its statement. “We were surprised to learn that DraftKings allowed its employees to participate in daily fantasy games. We have reached out and discussed this matter with them.”
- Letter from the office of the New York attorney general to DraftKings.
- Reactions from Sen. Harry Reid and Rep. Frank Pallone.
- Statement from California Assemblyman Adam Gray calling for a DFS hearing.
How does access to ownership data provide an edge?
Ed Miller, an independent games consultant who has written frequently about DFS, says that it’s difficult to overstate the value of lineup data.
“If you knew beforehand which players would be most used, in the major sports you can build +EV (positive expected value) cash game and GPP lineups based almost solely on that knowledge,” Miller told Legal Sports Report.
Ownership percentage is one piece of the puzzle that can be useful in skillfully setting DFS lineups, especially in guaranteed prize pool contests. Top players try to predict ownership percentages, and data about past ownership percentages can be dissected for information.
Because of the massive number of entries in the biggest contests at DraftKings and FanDuel — hundreds of thousands — it’s usually difficult to win a contest with a lot of players that are commonly owned.
Additional resources on this question:
- DFS pro Ray Coburn dives into the potential magnitude of the edge on the TwoPlusTwo podcast.
- Overview on the edge data can provide over at ESPN.
- Alex Weldon breaks down the basics of ownership percentage and its importance at PTP.
- RotoGrinders strategy article covering ownership percentage.
Did Haskell have access to data that facilitated his win at FanDuel?
We have seen no compelling evidence or credible accusations that Haskell’s FanDuel win was in any way connected to the data leak in question.
DraftKings has categorically denied that Haskell had access at a time that would have impacted his entry in the FanDuel contest in question:
RotoGrinders founder Cal Spears reported that Haskell did not have access to the data before setting his lineup at FanDuel. Here is his post from the RG thread, which included an update from Saturday:
There is a narrative running on Twitter that Ethan had access to this data before lineups locked and used it to play on Fanduel. From what I’m told he received the ownership report well after lineups locked on Fanduel. There is plenty of merit in a debate about site employees playing on different sites, but we need to base that debate in reality. Ethan was not using this data to pick his week 3 teams on Fanduel, he was writing about this data for DK Playbook after his week 3 teams on Fanduel had already locked.
Spears said he also confirmed with DraftKings co-founder Matt Kalish that the data that Haskell had access to was issued too late to be of use at FanDuel.
Photo by Eric Norris used under license CC BY 2.0.