A SCOTTISH company which allows fans of US sports to choose their ideal team in the hope of winning cash prizes is facing an investigation by American authorities amid a crackdown on the growing fantasy sports industry.
Edinburgh-based FanDuel, one of the country’s fastest growing firms, has been urged by the New York attorney general’s office to disclose whether staff have used the company’s data to “gain a personal advantage”.
It follows allegations that a high-profile employee of the firm earned more than £30,000 playing on DraftKings, a competing site.
With similar allegations being made about a DraftKings staff member said to have made around £230,000 by playing FanDuel, the claims have prompted questions about the use of insider information in fantasy sports websites.
In a letter from the New York attorney general’s office, seen by The Scotsman, the firm’s chief executive, Nigel Eccles has been asked to address 17 points as part of a “limited, initial inquiry”.
The correspondence – from the chief of the internet bureau at the office, Kathleen McGee – asks for details of internal fraud control policies, formal procedures about the use of company data, and practices which prohibit or restrict the firm’s employees, their friends, and relatives from playing daily fantasy sports on FanDuel or rival platforms.
Ms McGee said the letter followed reports of employees or agents of FanDuel who may have gained an “unfair financial advantage” by exploiting “access to non-public data.”
She said: “These allegations, and your company’s subsequent statement, raise legal questions relating to the fairness, transparency, and security of FanDuel and the reliability of representations your company has made to customers.”
According to reports in the US, the justice department and FBI are investigating whether the business model of fantasy sports firms violate federal law. Last week, regulators in Nevada ordered fantasy sports firms to cease operating unless they obtain a gambling licence
FanDuel said it has banned staff from playing fantasy sports for money on any site and it has launched an internal investigation of its controls, standards and practices.
In a statement, it said: “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.” But it added: “The incident has raised questions about the trust-based relationship we have with our players so just relying on what we know right now isn’t enough.”