Fantasy Sports Industry Under Scrutiny After Insider Trading Allegations

Transcript

ROBERT SIEGEL, HOST:

It hasn't been a good week for fantasy sports. The companies that run online fantasy contests are being closely watched. State and federal investigators are looking into how they do business. There are allegations of insider betting and a class action lawsuit has been filed.

Curt Nickisch, of member station WBUR, spoke to one of the CEOs feeling the heat and customers who question whether they should keep playing.

CURT NICKISCH, BYLINE: Taking in a baseball playoff at a sports bar in Boston, Sean Watland says he totally gets into playing daily fantasy sports. That's where you make up rosters of actual pro sports players to compete for cash.

SEAN WATLAND: The great thing about it, and the scary thing about it, is how much fun it is.

NICKISCH: But the 24-year-old has stopped spending money at DraftKings, the Boston-based fantasy website. Watland is not happy with the news that a DraftKings employee posted valuable internal company data online. The next day, that same employee won $350,000 in a contest at FanDuel, a similar website.

WATLAND: Frankly, I'm not surprised. I don't know if I would say that it's rigged. I would say that it's unfair.

JASON ROBINS: All I can say to those people is if we've let you down in any way, I am sorry. Rest assured that I am all over this.

NICKISCH: That's DraftKing CEO Jason Robins. The 34-year-old says there's no evidence his employee gained an edge looking at private company data. Still, DraftKings has hired a law firm to investigate. FanDuel is also reviewing its practices. Both companies this week banned their employees from playing fantasy sports for money. Here's Robins again.

ROBINS: Hindsight's 20-20, and I'm kind of kicking myself because you know, we should've changed this policy earlier and I think it would've avoided all of this.

NICKISCH: But some observers say these companies have ignored questions about their practices because they were focused on making money. Ben Brown is with the industry news site Daily Fantasy Sports Report.

BEN BROWN: This is kind of the watershed moment that there is some change that definitely needs to happen if we want to continue growing.

NICKISCH: That change could be forced on the industry, which argues it does not need to be regulated like gambling. But this week, New York's attorney general launched an inquiry, and Massachusetts Attorney General Maura Healey wants to know if DraftKings is protecting customers.

MAURA HEALEY: We're not looking to shut them down. But I do think it's right that people are a little bit miffed, you know, that they were literally playing against the house and, not surprisingly, the house made out pretty well.

NICKISCH: This crisis could not have come at a worse time. DraftKings and FanDuel have gained millions of customers with the help of an expensive ad blitz over the past month.

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UNIDENTIFIED MAN: This isn't fantasy as usual. This is DraftKings. Welcome to the big time.

NICKISCH: Now they have big-time trust issues. But not all their customers are cutting-off business.

SETH WORBY: I have a DraftKing and a FanDuel account, and what happens on the field happens on the field.

NICKISCH: At a Boston sports bar, 33-year-old Seth Worby says he's going to keep playing. Some people may have inside data, but Worby says it's still really hard to choose the winning players.

WORBY: They have to pick a team just like me. And if Tom Brady decides to show up and play then Tom Brady decides to show up and play, you know? Good luck to him. They're not catching touchdowns.

NICKISCH: But the companies are catching a lot of flak. Some fans have filed a federal class-action lawsuit alleging fraud, and a congressional committee is looking into the integrity of the industry.

For NPR News, I'm Curt Nickisch in Boston. Transcript provided by NPR, Copyright NPR.