FBI to investigate daily fantasy sites FanDuel and DraftKings

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With the scrutiny of daily fantasy sports sites ever increasing and with Congress taking an interest in their dealings, the FBI has begun investigating in order to determine if FanDuel and DraftKings have violated federal law, according to the Wall Street Journal.

Players who participate on those daily fantasy sites have been contacted by the FBI’s Boston office in order to discuss their experiences, and one player said that the investigators were focused more on DraftKings.

The two sites have been under increased scrutiny in recent weeks after a DraftKings content manager won $350,000 while playing on FanDuel, the same week a trove of insider data was accidentally leaked online. That led to speculation that employees of FanDuel and DraftKings were using insider information in order to win big money on competing sites.

Quickly, both sites banned employees from participating in games on rival sites, but that didn’t stop at least one player from filing a lawsuit in federal court.

Congress also has taken an interest in the matter, and Congressman Frank Pallone, Jr., (D-N.J.) said last month, “These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result. Despite how mainstream these sites have become, though, the legal landscape governing these activities remains murky and should be reviewed.”

More from the Journal:

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…

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.

In recent years, DraftKings has partnered with Major League Baseball, the NHL, and the UFC, while FanDuel is in partnerships with the NBA and 16 NFL teams. Last month, FanDuel purchased Alphadraft, one of the leading fantasy esports platforms. 

H/T New York Times | Photo via Tom Newby/Flickr (CC BY 2.0)

Josh Katzowitz

Josh Katzowitz

Josh Katzowitz is a staff writer at the Daily Dot specializing in YouTube and boxing. His work has appeared in the New York Times, Wall Street Journal, Washington Post, and Los Angeles Times. A longtime sports writer, he's covered the NFL for CBSSports.com and boxing for Forbes. His work has been noted twice in the Best American Sports Writing book series.