US fantasy sports businesses under scrutiny amid 'inside betting' claims

DraftKings and FanDuel were already under pressure over their activities as sports gambling is illegal in most US states, and it is now alleged that employees at both companies could use inside information to win cash windfalls on each other's sites

Fantasy sports site DraftKings has partnered the NFL for its international games - such as the one that took place at Wembley on Sunday (Getty Images)

The operations of the two biggest fantasy sports businesses in the United States, one of which is involved in bringing American football games to Britain, has come under scrutiny amid allegations that their employees could use inside information to win cash windfalls on each other’s sites.

DraftKings and FanDuel, were already facing pressure to explain why what they do does not constitute sports gambling, which remains illegal in most American states, when the latest scandal erupted this week. It could prompt calls for a review of the industry’s legal status.

The Draft Kings website. Players can win cash by selecting NFL players they expect to perform well

This would hardly be welcomed by the legion of American sports fans who pay fees ranging from a few cents to a $1,000 to participate on the sites. Equally anxious would be the big sports leagues, such as the National Football League (NFL), who have embraced the two companies as new and deep-pocketed sponsors. DraftKing has partnered the NFL for its international series of games in London.

Let’s just call it what it is... Americans love to bet on sports. Both companies should  be taxed and regulated

&#13; <p>Joe Asher, chief executive of William Hill’s operations in the US</p>&#13;

To the uninitiated, the two companies offer a whole new layer of engagement for sports fans, who assemble fantasy teams by picking players who really exist and then winning points and dollars based on how those players actually perform in subsequent games. It emerged late last week that an employee at DraftKings had won $350,000 (£230,000) with a team he fielded with his employer’s main competition, FanDuel, seemingly using data that was not available to the general public about the latest pick trends.

In other words, he allegedly knew which players were drawing the most attention of fantasy fans and used that information to his advantage.

Enthusiastic Miami Dolphins fans show their support at Wembley on Sunday (Getty)

The timing is bad for the industry. Its growing success – about 56 million Americans have by now succumbed at least once to the lure of pretending to be a builder of their own teams – is causing some to rethink an exemption it was granted in 2006 from America’s strict gambling laws.

The two companies and the sports leagues that like their support so much, argue that players on their sites aren’t gamblers because they are deploying skill to choose the right teams. Critics see that as a very big stretch.

“Let’s just call it what it is. Americans love to bet on sports,” said Joe Asher, the chief executive of William Hill’s operations in the US. “They both drive interest in the games and they both should be legal, and taxed and regulated.”

DraftKings acknowledged that one of its employees accessed information related to its Millionaire Maker game before a Sunday night NFL game and went on to take second place in a pool on the FanDuel site winning $350,000. Had he taken first place he would have won $1m.

As social media was set alight by rumours of skullduggery, the two companies moved swiftly to quick defensive action asserting in a joint statement that they had “strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs.”

It added: “Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.”

Fantasy sports is already illegal in five US states. However the chances that the industry will be outlawed altogether are slight, if only because of the size of the financial contribution it is already making to major sports. Moreover several of America’s largest media conglomerates such as Disney and Yahoo! have made their own plays in the businesses.