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New York Attorney General Investigating Fantasy Sports Sites

by Alex Johnson /  / Updated 

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New York Attorney General Eric Schneiderman is going all in on allegations that employees of online fantasy sports companies DraftKings and FanDuel may have leveraged insider information that could let someone make unfair — and highly profitable — bets.

In letters obtained Tuesday by NBC News, Schneiderman demanded that FanDuel and DraftKings identify all employees who compile statistics, set draft prices for fantasy sports players and compile information on fantasy players' winnings, among many other data points.

On Monday, The New York Times threw the fantasy sports betting world into turmoil by reporting that a DraftKings employee inadvertently released data from the company's Millionaire Maker game that showed he had access to information that could provide players with a secret advantage. The same week, the employee won $350,000 playing on FanDuel, the company's rival, according to The Times.

Both companies — which have generated about $2.6 billion in entry fees so far this year — barred employees from playing in such games for money after the allegations became public, while they "develop and release a more detailed policy," they said.

Related: The Fantasy Sports Industry by the Numbers

But Schneiderman said in the letters that he has opened a preliminary investigation because the allegations pose legal questions as well as ethical ones, raising "matters of concern to the public, particularly to the many customers who put money at risk on your site each day."

He gave the companies until Oct. 15 to respond.

"Fraud is fraud," Schneiderman said earlier Tuesday in an interview on the public radio program The Takeaway. "And consumers of any product — whether you want to buy a car, participate in fantasy football — our laws are very strong in New York and other states that you can't commit fraud."

Sen. Frank Pallone, D-New Jersey, last month called for a congressional review of the industry, which is exempt from gambling laws.

"It's clear now, with million-dollar jackpots and the advertising that goes on, that this is straight-out gambling," Pallone told NBC's TODAY.

Senate Democratic leader Harry Reid of Nevada called the allegations "absolutely scandalous."

Reid — former head of the Nevada Gaming Commission — called for a congressional investigation of the industry, telling reporters Tuesday in Washington that "online gaming is a real scary thing, and we ought to look at all of it."

Comcast Corp., the parent company of NBCUniversal and NBC News, has invested in FanDuel.

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