Legal Sports Report

DraftKings CEO Robins: Third Party To Audit Daily Fantasy Sports Site’s Systems

DraftKings
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DraftKings and FanDuel started increasing their public response to a story surrounding the security of data and game integrity at their daily fantasy sports sites on Wednesday.

Here is a look at all of the news from the world of DFS from the day, including statements and quotes from DraftKings, FanDuel, and the NFL, and developments in Maryland.

What DraftKings did

Robins made two media appearances, so far:

Fox Business News

DraftKings CEO Jason Robins went on Fox Business News on Wednesday morning (video here) to defend his company, which has been under fire since the data leak story that broke this weekend and went mainstream with a New York Times report on Monday.

He said little in the way of specifics as far as what has changed at DraftKings, or what policies his company had in place. The takeaways:

  • He did say that a third party was hired to review its internal practices.
  • The results of that independent investigation will be shared publicly once it is complete. No timeframe was given.
  • He said that “before any of this happened” that DraftKings and FanDuel had contracted with the third party.
  • He reiterated that the employee at the center of the story — Ethan Haskell — did nothing wrong, according to an internal investigation at DraftKings.
  • Robins said the data leaked by Haskell was “an error” and that “he will certainly be hearing about that from us.” This seemed to imply that DraftKings had not reprimanded, or even spoken to, Haskell about the leak, which seems to be at odds with a thorough investigation. Of course, this could also just be a problem in verb tense as Robins was speaking on live TV.
  • Fox asked if DraftKings had heard from the NFL, and Robins said he did not. DraftKings does not have a partnership with the league, but does have a relationship with 12 NFL teams, and also sponsors the NFL’s international series.
  • Employees are now banned from play daily fantasy sports for cash at any DFS site. Previously, that had been a temporary ban.
  • A Fox interviewer cut off his response, but he said that DraftKings plans to “fully cooperate with any inquiries,” likely referencing Tuesday’s news that the New York state attorney general was opening an investigation into FanDuel and DraftKings.
  • Fox asked if anyone had been canceling their “memberships.” Robins said that no one was. The question, however, was not framed in the right way. Players are far more likely to withdraw funds than to close their accounts.

Here is a partial transcript of what Robins said; we’ve excluded portions that were repetitive or already quoted above. The interview was fairly contentious at times, and the Fox interviewers asked versions of the same question several times.

First, I want to make it clear to everyone that we are completely committed to creating an open and transparent environment, Having the trust of our customers that the game is fair is everything to us. We have done everything I think to investigate this incident and have very clearly found through evidence that we pulled, records of when data was sent to this employee that there was absolutely no wrongdoing here.

It was a little disappointing the reports that come out did not account for those facts and unfortunately dragged this individual’s name through the mud. He’s a good kid, his name is Ethan he works really hard and I find it very disappointing in order to have a very important discussion that we are very open to having and very committed to having about how we an do a better job creating a trusted and open environment for everyone, it’s just unfortunate for me that somebody who was innocent had to be smeared in order to have that discussion.

So we have great records of when data is pulled and when communications are sent. So it was quite easy for us to go and pull those records.

We also contracted a third-party law firm that’s conducting an independent investigation and as soon as we have a summary of those findings, we will come and publicly share them.

I think this is an important discussion, and I am very much open. Before any of this happened, we had already contracted along with FanDuel to have a third party to come in and do a full audit of our procedures, make sure that if there’s any places that we can get better that we do.

We’re a young company, we’ve only been around three and a half years, and I think we’ve done a good job putting really strong policies and procedures in place. But they can definitely get better, and I know that. And there’s going to be a lot of work that we put behind this. I think it’s very important that everyone out there knows there’s the highest integrity in our games, and that players can trust that the competition is fair. And we will work tirelessly until everyone out there is very clear that this is the case.

We evaluated this and discussed it with the rest of the industry. My personal opinion is that no matter times I tell you guys we have controls and procedures in place, it’s still always going to be a question that is asked, and the really only satisfactory answer is just to completely prohibit employees from playing on each other’s sites. We have never allowed employees to play in any of the public games at DraftKings. And now it’s clear they shouldn’t be allowed to play in any of the public games on any of the competitors’ sites, so that’s a policy that we have put in place.

ESPN

Robins later appeared on Outside the Lines on ESPN to discuss the story. Here are some key notes and quotes that Robins did not address in his earlier appearance:

  • Greenberg-Traurig, headed by former U.S. attorney John Pappalardo, is in charge of the outside investigation.
  • The report from that investigation will be completed “in the next few days.”
  • Robins reiterated that the third-party review was already underway before this week.
  • Robins says that the information in question that was leaked would be an advantage if a DFS player had it in advance of a contest starting.
  • Robins says DraftKings employees could play at DraftKings only in about the first month of its existence — about three and a half years ago — before putting a policy in place that DraftKings employees could not play at DraftKings.
  • On employees playing at other sites: “I think this was a real eye-opening experience for us. In retrospect, it seems obvious that that would cause people some concern.”
  • “We looked at what we were doing internally, and the fact that we had pretty good monitoring and we could tell from our records if anyone was accessing data, and when they were accessing it, and how they were accessing it, and we felt like that was enough. But it really isn’t.”
  • Robins did not have an exact number of DraftKings employees that play at FanDuel, guessing a “few dozen.” He was unsure of how successful they were playing at FanDuel. (FanDuel offered information about how much money DraftKings employees won at FanDuel on Tuesday.)
  • Robins said they have a policy in place that employees agree not to use information received at DraftKings for a competitive edge. Any employee doing so would be terminated. No one has been fired for cause on this front, according to Robins.
  • When asked about regulation, Robins said he doesn’t think regulation of the DFS industry is inevitable, but he is open to it.

DraftKings statement

Eventually, DraftKings also released a written statement. DraftKings noted that it will also block players from other operators from playing at its site.

As a leader in the Daily Fantasy Sports industry, we take the trust of our community very seriously and remain fiercely committed to the integrity of DraftKings’ Daily Fantasy Sports product.

Effective immediately, DraftKings employees will be permanently prohibited from participation in any public daily fantasy games for money. We will also prohibit employees from any Daily Fantasy Sports contest operator from participating in games on DraftKings. We are glad to see that others in the industry have followed suit and believe that this is an important next step in retaining the trust of our players.

DraftKings has engaged a legal team from Greenberg Traurig, led by former United States Attorney John Pappalardo, to review our findings and conduct an investigation specific to the allegations against one of our employees. We will release the summary of those findings upon completion.

Furthermore, in order to maximize the integrity of our product and the protection of our players, we have been working with Greenberg Traurig to advise us on ensuring that our policies and practices are second to none.

DraftKings’ explosive growth is a testament to our ability to deepen our fans’ engagement with the sports they love. We are committed to reinforcing the trust and security of our millions of loyal customers.

Some of the interview can be seen here.

What FanDuel did

FanDuel released a new statement to the press via its website.

The biggest takeaway? FanDuel has retained former U.S. attorney general Michael Mukasey “to review facts, evaluate internal controls, standards and practices,” as first reported by ESPN business reporter Darren Rovell on Twitter.

Also:

  • FanDuel made the ban on employees playing DFS for real cash permanent, after a temporary ban was announced by both FanDuel and DraftKings late Monday night.
  • FanDuel is creating an internal advisory board, led by a former United States Attorney for the Southern District of New York.

Full statement:

Media reports yesterday raised issues concerning an employee from another fantasy site participating in our NFL Sunday Million contest last week. Trust with our players is core to our business and has always been our primary concern so we take any potential game integrity issue very seriously.

Based on everything we know thus far, there is no evidence indicating that the integrity of FanDuel’s contest was in any way compromised, or that non-public information was used for unfair advantage. That said, the incident has raised questions about the trust-based relationship we have with our players so just relying on what we know right now isn’t enough. That’s why we’re taking the following steps:

  • We have permanently banned our employees from playing any daily fantasy games for money, on any site. We will also require all customers to confirm that they are not an employee of any other third party fantasy site, and if they are, they will not be allowed to access our site.
  • We have asked former federal judge and United States Attorney General Michael Mukasey to review the facts and evaluate our internal controls, standards and practices.  His mandate is to conduct a review to identify ways that we can ensure we are doing the right things to maintain the trust we have with our players. He will have the freedom and authority to look at any areas he thinks appropriate. We will ask him and his team at the law firm Debevoise & Plimpton to develop a set of recommendations for us to adopt and to highlight any areas where our controls can be strengthened.
  • We are also creating an internal advisory board, led by Michael Garcia of the Kirkland & Ellis law firm and former United States Attorney for the Southern District of New York. The advisory board will provide on-going advice, recommendations and guidance to ensure that we are always taking every step possible to ensure the integrity of our site and our games. We also look forward to speaking with regulators across the nation about how to define the right set of rules for our industry as it continues to grow.

FanDuel is one of the fastest growing companies in the world. The way fans have embraced our games is a clear sign that fantasy sports is here to stay.

It’s our job to ensure that as our company grows, so does our ability to ensure that our fans can be confident in the sanctity and integrity of every game, every day.

NFL weighs in

After there were comments from the NBA and MLB on Tuesday, the NFL weighed in on DFS, as well. NFL commissioner Roger Goodell commented on Wednesday. Story here:

“We feel that a cautious approach is the right way, but we’re protecting our game,” he said. “Daily fantasy — it’s hard to see the influence that it could have on the outcome of a game because individual players are picking different players from different teams, mashing them up, you might call it, and it’s not based on the outcome of a game, which is what our biggest concern is with sports betting.

State matters

After we learned that several states were taking a closer look at DFS on Tuesday, on varying fronts, there was a little less movement on Wednesday. Maryland officials were asked to weigh in; of note is that Maryland years ago passed a law that, in theory, legalized fantasy sports for cash.

More from the story:

Gordon Medenica called into question the legality of the industry in response to questions raised by Comptroller Peter V.R. Franchot at a Board of Public Works meeting Wednesday.

“I think it’s a clever attempt to get around the need for regulations,” said Medenica. “I think it’s a powder keg. Certainly within the gaming industry right now it’s probably topic No. 1.”

“It does appear to be just gambling,” said Lt. Gov. Boyd Rutherford. “It’s basically advertised as gambling.”

At the same time, Massachusetts AG Maura Healey apparently concluded her review of DFS and DraftKings, and said it was legal.

Story here:

Attorney General Maura Healey said Wednesday that she’s not pursuing any criminal inquiries into the Boston-based fantasy sports league website DraftKings Inc., which was thrust into the national spotlight this week when an employee from the company collected winnings from a rival website’s contest allegedly based on insider information.

She said that there were no federal or state laws that prohibit daily fantasy sports sites from operating, and customers who use DraftKings’ services shouldn’t be worried that they’re breaking the law.

“We’re not looking to shut them down,” she said.

Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.
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