DraftKings Employee Leaked Fantasy Info, Won $350K from FanDuel in Same Week

DraftKings and FanDuel released a joint statement on Oct. 5 to defend their business practices as the chief facilitators of the booming daily fantasy sports industry.

Joe Drape and Jacqueline Williams of the New York Times reported on the matter and shared the statement. The companies' collective response came because a DraftKings employee, Ethan Haskell, won $350,000 at FanDuel after leaking fantasy data ahead of Week 3 of the NFL season:

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Both companies have 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. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.

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A DraftKings spokesperson said the insider information that Haskell, a DraftKings content manager, accidentally released consisted of data on the most frequently used players in lineups for the site's Millionaire Maker contests.

On Oct. 17, DraftKings released a summary of the findings from an investigation led by former U.S. Attorney John Pappalardo of Greenberg Traurig LLP, which was obtained by ESPN.com's David Purdum:

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According to the investigation, Haskell received an Excel file containing aggregate player ownership percentages for all weekend NFL games for use on the weekly story he composed. The data was not previously available to the public. The report shows a FanDuel account registered to Haskell submitted a lineup in the $25 buy-in, $5 million guaranteed NFL Sunday contest at 3:28 a.m. on Sept. 27.

"[Greenberg Traurig] has confirmed the Company's conclusion that Mr. Haskell could not possibly have entered the winning lineup based upon his receipt of the Company's non-public aggregate ownership percentage information, because he did not receive that information until 40 minutes after the lineup was locked," the investigation concluded.

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Heitner Legal's Darren Heitner provided a screenshot of additional findings:

DraftKings CEO Jason Robins released a statement following the findings, per Purdum:

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We are very pleased that the independent investigation by Greenberg Traurig has confirmed the findings to our internal review of this matter and our conclusion that there was no improper use of information by our employee. In fact, as the investigation also concluded, it was not even possible for non-public information to have been used improperly.

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Within days of the initial report, FanDuel released a statement on its own on Oct. 7 addressing the issue:

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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. 

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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.

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FanDuel also announced a number of steps in reaction to the incident in the statement. It has permanently banned employees from playing daily fantasy games for money and will also require customers to confirm they're not an employee of any "third-party fantasy site."

An internal advisory board will also be created by FanDuel to "provide ongoing advice, recommendations and guidance to ensure that we are always taking every step possible to ensure the integrity of our site and our games."

Finally, FanDuel has asked former U.S. Attorney General Michael Mukasey to investigate the incident and "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."

DraftKings posted its statement on the situation on Oct. 6, disputing the New York Times' report:

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There has been some confusion regarding a recent piece of data that was inadvertently posted on DraftKings’ blog containing information about players and fantasy games. Some reports are mischaracterizing the situation and implying that there was wrongdoing. We want to set the record straight. For the last several days, DraftKings has been conducting a thorough investigation, including examining records of internal communications and access to our database, interviewing our employees, and sharing information regarding the incident with FanDuel. The evidence clearly shows that the employee in question did not receive the data on player utilization until 1:40 p.m. ET on Sunday, September 27. Lineups on FanDuel locked at 1:00 p.m. that day, at which point this employee (along with every other person playing in a FanDuel contest) could no longer edit his player selections. This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup. Again, there is no evidence that any information was used to create an unfair advantage, and any insinuations to the contrary are factually incorrect.

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The Fantasy Sports Trade Association, DraftKings and FanDuel also released a joint statement on Oct. 6, per DraftKings.com:

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The Fantasy Sports Trade Association (FSTA), DraftKings and FanDuel have always understood that nothing is more important than the integrity of the games we offer to fans. For that reason, the FSTA has included in its charter that member companies must restrict employee access to and use of competitive data for play on other sites. At this time, there is no evidence that any employee or company has violated these rules. That said, the inadvertent release of non-public data by a fantasy operator employee has sparked a conversation among fantasy sports players about the extent to which industry employees should be able participate in fantasy sports contests on competitor sites. We’ve heard from users that they would appreciate more clarity about the rules for this issue. In the interim, while the industry works to develop and release a more detailed policy, DraftKings and FanDuel have decided to prohibit employees from participating in online fantasy sports contests for money.

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Knowing the general consensus on lineups would create an undeniable advantage for those with access to the privileged intelligence. FiveThirtyEight's Nate Silver offered a compelling solution to the problem:

Employees from both major sites are already banned from competing at their own companies but are now temporarily, or in FanDuel's case permanently, prohibited from competing at rival sites as well.

Fantasy sports are unregulated and don't have a formal auditing policy at the moment. That could change if fantasy employees are modifying their own lineups or utilizing insider information after learning how the vast majority of contestants are setting up their daily fantasy teams.

Banning fantasy sports employees from competing in the rotosphere is a strong first step, but debate will likely rage on about how DraftKings and FanDuel fit into the conversation of sports betting. They are currently exempt thanks to a 2006 U.S. federal law, per Drape and Williams' report.