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The DraftKings data leak story continued to pick up momentum on Tuesday, with major cable outlets devoting large chunks of the time to problems in the daily fantasy sports industry.
The biggest news came in the form of a report that ESPN and DraftKings are putting their marketing relationship on hiatus, at least for a day, a surprising statement from Major League Baseball, and an inquiry in the state of New York.
For background on the story involving the security of data and contest integrity at DraftKings and throughout the DFS industry, read our initial take with frequently asked questions.
Late Monday night, both DraftKings and the Fantasy Sports Trade Association offered statements that offered a few specifics:
In what might be the first of many such inquiries from state attorneys general, the New York Times reported Tuesday night that NY AG Eric T. Schneiderman opened an “inquiry” into DFS:
The New York attorney general began an inquiry Tuesday into the prospect that employees of daily fantasy football sites have won lucrative payouts based on inside information not available to the public, asking two leading companies, DraftKings and FanDuel, for a range of internal data and details on how they prevent fraud.
Full story here. Schneiderman told the Times that he would be looking into if any instances of fraud were going on in at DFS sites. New York is one of 45 states that DraftKings and FanDuel operate in. According to some legal experts, DFS sites operate in New York in a gray area. Also:
Not surprising NY Attorney General launches probe into DFS companies: NY has very strong consumer protection laws. https://t.co/jwBPUN8SPu
— Michael McCann (@McCannSportsLaw) October 7, 2015
Schneiderman also sent letters to the CEOs of FanDuel (Nigel Eccles) and DraftKings (Jason Robins). Read them here and here. The letters ask both CEOs a series of questions, and they ask for a response by October 15.
That move also comes as there has been increased talk of a Congressional hearing happening in the near future. The NYT also reported that Rep. Hakeem Jeffries, a New York democrat, renewed calls for such a hearing. Rep. Frank Pallone, who originally called for the hearing, also issued a statement:
“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. Daily fantasy sports is functioning in a Wild West void within the legal structure. Like professional sports betting, fantasy sports should be legal, but both are currently operating in the shadows. 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.”
Pallone did an interview in which he said he hoped a hearing would be held in November or December.
Senator Bob Menendez joined with Pallone to send a letter to Federal Trade Commission Chairwoman Edith Ramirez “urging the FTC to explore and implement safeguards to ensure a fair playing field for fantasy sports enthusiasts who participate in daily or weekly games.” Full statement and letter here.
In other state legal news:
— Chris Krafcik (@CKrafcik) October 6, 2015
“We are establishing a first in the nation framework to regulate Daily Fantasy Sports wagering so that California consumers can be assured that they are gaming in a safe and fair environment. It is not my intent to stifle or ban this growing industry as other states have done, but I believe California has a responsibility to protect its consumers. We need to crack down on unregulated online gaming and replace it with a safe and responsible entertainment option for adults, which includes safeguards against compulsive and underage gambling, money laundering, fraud, and identity theft,” says Assemblymember Gray.
For more on legislation at the state level, visit LSR’s bill tracker.
The relationship between ESPN and DraftKings started heading south early in the day. On the show Outside the Lines on ESPN, host Bob Ley announced that ESPN would continue airing commercials from DFS sites, but said that the network “has removed sponsored elements from within shows.” That, in and of itself, was a major move, as ESPN football programming had increasingly added DFS and DraftKings content.
Deadspin reported that the decision to pull those sponsored elements would be evaluated day to day.
DraftKings then told USA Today that it had pulled its advertising from ESPN as of Tuesday in the wake of the leak story blowing up in mainstream media. From the report:
Asked if the company’s advertising has changed, an ESPN spokesman told USA TODAY Sports that “Draft Kings made the decision to pull their advertising for today, which we have obliged.”
It is not known how long DraftKings will take a hiatus from advertising on ESPN.
This summer, ESPN and DraftKings inked a huge marketing deal that included exclusivity rights that would begin in 2016. That came after reported interest of a DraftKings investment by ESPN parent company Disney did not come to fruition.
After the ESPN news, the most shocking development of the day came from Major League Baseball; DraftKings is the “official fantasy partner” of MLB.
MLB apparently was unaware that employees at DraftKings could play daily fantasy sports, as it released a statement in the wake of media coverage of the leak:
“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. 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.”
That statement despite the fact that MLB theoretically did its due diligence in deciding to invest in DraftKings. DraftKings and FanDuel announced that their employees could no longer play DFS for cash, at least temporarily, as of Monday night.
The NFL did not make an actual statement on the ongoing crisis, not does it have a partnership with either DraftKings or FanDuel, like MLB, the NHL and the NBA do. But ESPN reporter Darren Rovell tweeted this this morning:
NFL says teams can't associate team logos w/daily fantasy companies or sell a sponsorship, but can sell them ads & stadium signage
— Darren Rovell (@darrenrovell) October 6, 2015
This merely lines up with what the NFL has said on the subject of DFS previously, however, as it continues to keep DFS somewhat at arm’s length. (However, despite the lack of a league partnership, 28 NFL teams have deals with either DraftKings or FanDuel; DraftKings also just partnered with the NFL to sponsor its International Series.
The NBA made a pretty vague statement in the wake of the news; the NBA and FanDuel are partners. More from ESPN Chalk:
“We are monitoring recent reports concerning the use of data on daily fantasy sports platforms and have been advised that all appropriate actions are being taken to maintain the highest level of integrity for fantasy players,” NBA spokesman Mike Bass told ESPN Chalk.
There were calls for regulation of the DFS industry from what appear to be on the surface unlikely sources — a gambling company and a top DFS pro.
Amaya and StarsDraft.com call on state regulators to adopt tougher restrictions that safeguard players and institute controls to ensure all operators are held to a high standard of consumer protection and business integrity. We are launching an active effort to work with states to enact legislation that meets the consumer protection interests of all parties.
Cory Albertson, a professional DFS player, penned an article at the Wall Street Journal that also called for regulation:
Ray and I have long encouraged daily fantasy operators to take measures to better regulate themselves and instill greater protections for their players. Most of those have been ignored, even as the industry has been growing into something closer to a vibrant financial market than a casual hobby for sports fans.
Operators like FanDuel and DraftKings have resisted my suggestions on ways they could be proactive about policing their own businesses, choosing instead to pursue breakneck growth (you’ve undoubtedly seen their ubiquitous advertisements.) More outside oversight of daily fantasy sports has become inevitable and is needed.
Image via Shutterstock for editorial use only. Copyright: Leonard Zhukovsky