DraftKings CEO had ‘reservations’ about employees playing fantasy sports, but didn’t expect uproar

DraftKings co-founder and CEO Jason Robins.
DraftKings co-founder and CEO Jason Robins.

The chief executive of DraftKings Inc. said he had “some reservations” about employees entering fantasy sports contests for cash prizes and privately suggested that his company and its rivals restrict the practice.

But he said no one in the industry expected that letting employees seek big prizes would generate a huge controversy over their access to data, and whether that might give fantasy sports workers a competitive edge in lucrative contests.

“Hindsight’s always 20/20. I don’t think if we had known it would blow up like this, that it would have been something that we would have continued with,” DraftKings cofounder and CEO Jason Robins said Wednesday.

Hiring expert players was a key advantage in the early days of online fantasy sports startups like DraftKings, which was founded less than four years ago and was recently valued by investors at more than $1 billion.

And as the sector grew, with Boston-based DraftKings battling New York’s FanDuel Inc. for dominance, both companies continued to let their workers enter fantasy-sports contests on competing websites while banning them from playing their own employer’s contests.

“It wasn’t like we were trying to hide it. It wasn’t like this was some big secret,” Robins said.

Those policies changed dramatically on Wednesday, with both fantasy sports companies instituting permanent bans on their workers participating in most online fantasy contests, and saying they would block other companies’ employees as customers.

“It was never anything early on that people really thought would cause this kind of controversy,” Robins told the Globe. “Now that we’re bigger, and looking back on it, I get it a little bit more. And I, to be honest, did  have some reservations about this, and have spoken in the past with some of our competition about whether we should have policies such as this one in place.”

On Wednesday, FanDuel said it would stop its workers from playing “any daily fantasy games for money, on any site.” DraftKings stopped short of a total ban, saying its workers would still be allowed to participate in private, invitation-only games that are closed to the general public.

The broader employee bans came in reaction to criticism and questions from players, media, and regulators about employee access to critical fantasy sports data.

The controversy grew after a DraftKings employee was accidentally granted early access to data that could have given players an edge in NFL fantasy games two weekends ago, and posted it online briefly. The next day, the DraftKings employee won $350,000 in a contest at rival FanDuel. But both companies say it was a coincidence, with no evidence of wrongdoing by the DraftKings worker.

In an hourlong interview with the Globe, Robins strongly defended the DraftKings employee who became a symbol of questions about the fast-growing industry’s ethics.

DraftKings’ internal investigation showed that the worker in question did nothing wrong, and only had access to the data on player ownership trends after he could no longer alter the lineups for the FanDuel NFL contest that awarded him $350,000 for second place.

Robins said the employee, Ethan Haskell, was being treated by others as “a sacrificial lamb who did nothing wrong.”

“He’s a young kid, works really hard. He’s always one of the last people to leave the office every night. And he is completely not in the wrong here. It is just so unfair,” Robins said. “Say what you want about me, say what you want about our company and areas that we could be better and I’m sure there’s plenty. But it didn’t need to go this way.”

Regulators have taken notice of the controversy, including some members of Congress and attorneys general. New York’s attorney general has sent a letter formally inquiring about employee access to data at fantasy sports sites, and Massachusetts Attorney General Maura Healey on Wednesday said she wanted to get a better explanation from both companies about their practices.

“My focus is on ensuring that there are proper consumer protections in place,” Healey said. “We have contacted the companies and have asked them to come in to answer further questions on these issues.”

Others were less surprised. Some industry observers have noted that controversy seemed inevitable for the fast-growing sector, which now awards billions of dollars in annual prizes. Although most online gambling is illegal under federal law, fantasy sports contests enjoy a specific exemption that has allowed the fast-moving “daily” version of the games to flourish.

The biggest names in media and sports have backed the sector, with the NBA, Comcast, Fox Sports, Major League Baseball, and NFL team owners counted as investors in the two largest companies.

Robins said that while no system could be foolproof, he was confident that the data-protection procedures at DraftKings are strong enough to catch cheats. Data that could give players an advantage is only allowed to be accessed by certain types of employees, such as customer service or engineering workers, Robins said. The company also has records who when data is accessed and who sees it, and those records are periodically audited.

“We have not to my knowledge ever had this happen — we’ve never had a case once where we have identified an employee that was using data that they shouldn’t be to gain a competitive edge,” Robins said.

Robins said he only expected a handful of workers to leave the industry because of the ban.

“Most of the people who are playing are playing for very small amounts of money and they’re going to be disappointed that they can’t play anymore because they enjoy it. But at the end of the day they’re not going to leave their job over it,” he said.

Updated 6:58 p.m. to correct timeline of when employee won prize.