FBI, Justice Department Investigating Daily Fantasy Sports

[DemonGeminiX]

Wall Street Journal

The U.S. Justice Department and the Federal Bureau of Investigation are probing whether the business model of daily fantasy sports operators violates federal law, according to people familiar with the matter.

FBI agents from the Boston office have been contacting customers of DraftKings Inc. to ask them about their experiences with the Boston-based company, one person familiar with the matter said.

The probe is in the preliminary stage, two people said. It is part of an ongoing discussion within the Justice Department about the legality of daily fantasy sites, in which customers pay entry fees to draft virtual sports teams that compete against each other for prize money based on the real-world performances of athletes. Congress in 2006 prohibited financial companies from transferring money to online gambling sites and several were shut down. But so-called games of skill were exempted. Fantasy sports sites have since operated under that exemption. So-called daily fantasy sites like DraftKings and FanDuel, Inc. didn’t become popular until after the law was enacted.

The Justice Department is trying to determine whether daily fantasy games are a form of gambling that falls outside the purview of the exemption. No decision on the matter has been reached, these people said.

Hundreds of millions of dollars in venture capital and player money are flowing into the booming fantasy-sports industry, which counts sports leagues, Google Inc.’s investing arm, and major media companies such as Comcast Corp. and 21st Century Fox Inc. among its investors. Wall Street Journal-owner News Corp and 21st Century Fox were part of the same company until 2013. Walt Disney Co. earlier this year scuttled a planned investment in DraftKings, though the companies maintain a marketing relationship.

Daily fantasy came under scrutiny last week after a DraftKings employee admitted on a fantasy-sports message board last week that he had prematurely released sensitive data about the site’s biggest contest. The same week, he won $350,000 on FanDuel, something both companies acknowledge. DraftKings said the leak was an accident, and both companies said he didn’t benefit from having early access to data.

FanDuel has hired an outside investigator to conduct an internal review and make recommendations on how to strengthen controls on sensitive information. DraftKings has hired an investigator to look into unspecified allegations against an employee.

“It is entirely predictable that the government would follow up on the misleading reports about our industry,” a DraftKings spokeswoman said in a statement. “We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.”

FanDuel has said daily fantasy is a game of skill, not luck, and is therefore exempt under the 2006 law.

The New York Attorney General’s office has asked both companies for a draft(sic) of internal data including the win/loss records of players, algorithms that determine the fantasy pricing for athletes and details on their policies to prevent fraud. The companies have until Thursday to respond.

The Massachusetts Attorney General’s office is in talks with both companies over putting in place proper consumer protections, according to a person familiar with the discussions.

http://www.msn.com/en-us/money/markets/fbi-justice-department-investigating-daily-fantasy-sports/ar-AAfsl2e?li=AAa0dzB

[DemonGeminiX]

I had a really strong feeling that this wouldn't go uncontested for very long.

[RBP]

I had a really strong feeling that this wouldn't go uncontested for very long.

No, you just despise being wrong. :lol:

[DemonGeminiX]

:hand:

I can accept being wrong. Now we'll see if I really am.

[HyperV12]

I have never understood how these fantasy league things work.

[DemonGeminiX]

You choose a pro sport that you like to follow, then you join a fantasy league based on that sport. You pick pro players from that sport to be on your fantasy team. You're awarded or penalized fantasy points based on certain metrics measuring your fantasy team's players real play during their real games (depends on the sport, the position played, etc). You're generally going head to head in a match up with another person in your fantasy league for an entire week, so whoever's fantasy team scores the most fantasy points during the week wins that fantasy match up. Generally, you play during the entire sport's season, so you'll have match ups every week during that sport's real season up until the playoffs start, and you'll play a round robin style of match ups to determine position in standings. If there are 4 guys in your league and you're A, you'll play B, C, D continuously over and over again until you get to the fantasy playoffs. When the real sport season starts nearing its end (i.e. when it gets close to the playoffs in the regular sport league's world), the top-seeded fantasy teams in your league will play a small fantasy tournament bracket style playoff to determine final standings for the fantasy season. That usually lasts 2 weeks for a 4 fantasy team playoff. The winner of that tournament is the winner of the fantasy league.

[Teh One Who Knocks]

I had a really strong feeling that this wouldn't go uncontested for very long.

Yeah, I was never quite sure how this stuff got around gambling laws, because no matter how you try to paint it, this IS gambling.

[RBP]

:hand:

I can accept being wrong. Now we'll see if I really am.

You already were. :hand:


Yeah, I was never quite sure how this stuff got around gambling laws, because no matter how you try to paint it, this IS gambling.

Fantasy sports were specifically excluded from the internet gaming prohibition.

[Teh One Who Knocks]

Fantasy sports were specifically excluded from the internet gaming prohibition.

Yeah, and at the time they weren't a multi-gazillion dollar industry either

[RBP]

Yeah, and at the time they weren't a multi-gazillion dollar industry either

And? Perhaps the law will change, but as it stands, the debate isn't whether it is gambling, it is whether it should be illegal.

There are slot machines on every corner of this state now. Oh right, that's government controlled like the lottery. That makes it totally different and totally okay. Like fer sure.

[Teh One Who Knocks]

There are slot machines on every corner of this state now. Oh right, that's government controlled like the lottery. That makes it totally different and totally okay. Like fer sure.

http://www.tehfalloutshelter.com/showthread.php?75159-Unlucky-winners-Illinois-lottery-halts-payouts-of-over-600-over-state-budget-deadlock

If you guys want to donate your money to the state of Illinois, that's your business :haha:

[RBP]

http://www.tehfalloutshelter.com/showthread.php?75159-Unlucky-winners-Illinois-lottery-halts-payouts-of-over-600-over-state-budget-deadlock

If you guys want to donate your money to the state of Illinois, that's your business :haha:

:lol: yeah that's bullshit, but they are IOU's not that they won't be paid.

[DemonGeminiX]

I read somewhere that Illinois' State property taxes are going up, too? Or is that just Cook County?

:-k


And those one a day jobbers are totally gambling.

[DemonGeminiX]

Sorry, it was the city property taxes that were going up. Cook county is raising its sales tax.

[deebakes]

i think that i posted something in the other thread where rbp was talking about doing this that i didn't think the "average" player had much chance of making any money :shrug:

[DemonGeminiX]

Nevada has ordered the 2 sites to shut down and has said they can't operate in the state without a gambling license.

http://www.msn.com/en-us/money/markets/daily-fantasy-sports-sites-ordered-to-shut-down-in-nevada/ar-AAfvurd?li=AAa0dzB

When Nevada turns against you, that's not good.

[RBP]

Nevada has ordered the 2 sites to shut down and has said they can't operate in the state without a gambling license.

http://www.msn.com/en-us/money/markets/daily-fantasy-sports-sites-ordered-to-shut-down-in-nevada/ar-AAfvurd?li=AAa0dzB

When Nevada turns against you, that's not good.

I would think the opposite. Nevada would be the first state to try and protect the casino sports books.

Again, I am not arguing if it is gambling. I was simply pointing out the legal justification based on an explicit exclusion.

[Teh One Who Knocks]

Jennifer Kovaleski - 7 News Denver


DENVER - It's hard to watch any sporting event and not see an ad or logo for DraftKings or FanDuel, two of the major Fantasy sites where players earn money based on how well their chosen players are performing.

"Just chose a league, pick your team, and get your cash winnings after," said one advertisement.

The $3 billion daily fantasy sports sites are everywhere, and promising to pay out big money. But are they legal?

That is the question the FBI is now looking into, while Nevada has already banned the sites. Regulators ruled they should be considered gambling and banned sites like FanDuel and DraftKings, until they get a gambling license.

"It's Vegas covering their behind because it's not regulated like the gaming industry," said Bob Donchez, faculty director of CU's Business of Sports.

The decision in Nevada was a significant setback for the booming, yet unregulated industry.

There have also been allegations of "insider trading" after a DraftKings employee released internal data and won $350,000 in a FanDuel contest that same week.

Donchez said he does not believe it's gambling because there is skill involved.

"If it's gambling where are the odds, you don't see odds on the different players," he said.

Daily fantasy sports are similar to regular fantasy leagues, but instead you have a chance to draft a different team every day.

Donchez said it works a lot like Wall Street.

"Instead of picking IBM or Microsoft, you're picking Troy Tya Lewinsky or Tom Brady."

However, while Wall Street is heavily regulated, Daily Fantasy falls into a gray area.

"How is it being controlled, where is it being controlled, we just aren't sure," said Donchez.

Colorado is still looking into the legality of daily fantasy sites, but Attorney General Cynthia Coffman said she is actively monitoring the situation before determining next steps.

Donchez does not think daily fantasy is going anywhere anytime soon, but said the rules of the game could be changing.

"Some type of regulation needs to be put in play," he said.

[Teh One Who Knocks]

Donchez said he does not believe it's gambling because there is skill involved.

:roll:

Skill...it's blind fucking luck. Sure, you can make an educated guess on which players will do well, but good players have bad games all the time. It's complete fucking luck if every player you pick has a good game. It's gambling dumbass, you're wagering money that your team will do better than the other teams in your "league".

[Teh One Who Knocks]

The Associated Press


BOSTON – If fantasy sports websites are allowed to continue operating in Massachusetts, they would likely have to do so under a "robust" regulatory framework, state Attorney General Maura Healey said Friday as her office continued an examination of the sites that have also drawn scrutiny from other states.

Healey has given no timetable for completing her report and said in an interview with The Associated Press that her focus is on consumers, particularly those who struggle with gambling addiction.

Companies like Boston-based DraftKings and New York-based FanDuel contend their sites aren't gambling, are legal, and were exempted from a federal online gambling prohibition in 2006. Players pay an entry fee to compete for cash prizes in games involving college or professional sports.

"I firmly believe that, if this is permitted to go forward here, that we need (a) strong, robust regulatory framework in place to protect consumers, to protect young people," Healey said. The Democrat added that the Legislature could also potentially consider issues related to taxation of the industry.

Stephen Crosby, chairman of the Massachusetts Gaming Commission, revealed earlier this week that the panel has been asked by legislative leaders and Republican Gov. Charlie Baker to also review the sports fantasy sites. The commission licenses and regulates casino gambling and horse racing in the state.

Crosby said he wasn't at all surprised by the rapid growth in the popularity of fantasy sports sites.

"No, I think this is the world we live in now," he said in a separate AP interview. "You know, the Internet is a disruptive technology and it disrupts every industry. It disrupted the music industry, it disrupted the movie industry, it disrupted the retail industry, now it's disrupting ... the gambling world."

The five-member panel will discuss the possible need for regulation during its next meeting on Thursday, and expects to offer "constructive advice" to the Legislature, Crosby added.

Healey has made clear her reservations about legalized gambling in the past and has supported an unsuccessful effort to ban casinos in Massachusetts, but she has insisted those positions won't impact any recommendations about fantasy sports sites.

DraftKings, which has said it welcomes the state review, confirmed recently that it asked former Attorney General Martha Coakley to serve as an outside adviser on legal and regulatory matters. Healey worked under Coakley before winning the office in last November's election when Coakley ran unsuccessfully for governor.

Coakley's role with DraftKings was "completely irrelevant" to her own review of fantasy sports, Healey said.

[Teh One Who Knocks]

The Associated Press


NEW YORK – New York's attorney general on Tuesday ordered the daily fantasy sports companies DraftKings and FanDuel to stop accepting bets in the state, saying their operations amount to illegal gambling.

In a pair of letters sent to the companies, Attorney General Eric Schneiderman said that after a one-month investigation, his office had concluded that the daily contests are essentially games of chance, not skill.

He drew a sharp distinction between the operations of daily fantasy sports sites and traditional fantasy leagues, which he said were legal partly because they relied on months of smart play over the course of several months. DraftKings and FanDuel contests, he wrote, are about "instant gratification" and involve no long-term strategy.

Schneiderman also said advertisements by the two companies, including one from Draft Kings promoting the site as "the simplest way of winning life-changing piles of cash," misled players about their chances of winning. The top 1 percent of players, he wrote, take home most of the prizes.

"Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country," Schneiderman said in a statement issued after the letters were sent.

Both companies insisted that their games are legal and based on skill and said they were reviewing their legal options. Schneiderman's letter gave the companies five days to respond and show why he shouldn't initiate legal action.

"This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country," FanDuel said in a statement. "The game has been played — legally — in New York for years and years, but after the attorney general realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal."

DraftKings said it was disappointed in Schneiderman's action, "particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill." It said the company would "vigorously pursue all legal options available to ensure our over half a million customers in New York state can continue to play the fantasy sports games they love."

FanDuel's offices are in New York. DraftKings is headquartered in Boston.

Schneiderman's actions were aimed only at the two companies but could serve as a warning for other companies with similar operations.

Fantasy sports has been a popular U.S. pastime for years, but daily contests, where winners and losers are decided in one night, rather than over the course of a season, have exploded in popularity recently. DraftKings and FanDuel have advertised heavily on the Internet and TV ahead of and during the 2015 NFL season.

The sites have come under increased scrutiny since it was revealed last month that a midlevel DraftKings employee playing fantasy football beat more than 200,000 other players, winning $350,000 on rival FanDuel. The case raised questions about insider trading after game data not publicly accessible was inadvertently posted online.

The companies have said their employees didn't appear to violate industry rules but launched internal probes and barred their workers from playing on rival websites.

News of that episode prompted Schneiderman to ask the companies to turn over information.

Nevada regulators ordered the sites to shut down on Oct. 15, ruling that they couldn't operate in the state without a gambling license. States including New Jersey, Pennsylvania, Massachusetts and Georgia have considered enacting their own rules.

[deebakes]

it was only a matter of time... :(

[Hal-9000]

You choose a pro sport that you like to follow, then you join a fantasy league based on that sport. You pick pro players from that sport to be on your fantasy team. You're awarded or penalized fantasy points based on certain metrics measuring your fantasy team's players real play during their real games (depends on the sport, the position played, etc). You're generally going head to head in a match up with another person in your fantasy league for an entire week, so whoever's fantasy team scores the most fantasy points during the week wins that fantasy match up. Generally, you play during the entire sport's season, so you'll have match ups every week during that sport's real season up until the playoffs start, and you'll play a round robin style of match ups to determine position in standings. If there are 4 guys in your league and you're A, you'll play B, C, D continuously over and over again until you get to the fantasy playoffs. When the real sport season starts nearing its end (i.e. when it gets close to the playoffs in the regular sport league's world), the top-seeded fantasy teams in your league will play a small fantasy tournament bracket style playoff to determine final standings for the fantasy season. That usually lasts 2 weeks for a 4 fantasy team playoff. The winner of that tournament is the winner of the fantasy league.

So instead of picking a complete team to bet on week in and week out, you're picking a hodge-podge of players from multiple teams and then each one gets rated based on the real weekly performances?

Wow...I'd rather bet on a full team throughout a season than a mix of players from a variety of teams.

[DemonGeminiX]

So instead of picking a complete team to bet on week in and week out, you're picking a hodge-podge of players from multiple teams and then each one gets rated based on the real weekly performances?

Wow...I'd rather bet on a full team throughout a season than a mix of players from a variety of teams.

That would be too easy. Everybody would be gunning for the hottest team in the league.