Players, insiders expected controversy as fantasy sports grew to a behemoth

The DraftKings headquarters in Boston.
The DraftKings headquarters in Boston.

Online fantasy sports have become a multibillion-dollar industry seemingly overnight, drawing investments from the biggest names in sports and media and generating enormous advertising budgets.

But some insiders and observers have expressed concerns for months that the industry was perhaps growing so quickly that a reckoning of some kind was in the cards.

Fantasy sports player Jason Kamlowsky of Winchester, Va., saw warning signs last month when the start of the NFL seasons brought an all-out ad blitz from the two biggest fantasy sports sites in the United States, Boston-based DraftKings and New York’s FanDuel.

“I was like, ‘It’s not going to end well. Somebody somewhere is going to stick their nose in there where it doesn’t belong,’” Kamlowsky said. “Some politician is going make it their crusade.”

He wasn’t the only one.

As the daily fantasy industry deals with its first major controversy — whether the games offer a level playing field for all participants, or whether workers in the industry have an unfair advantage if they play on rival sites  — some are noting that it shouldn’t be a surprise.

Adam Krejcik, a gambling and fantasy sports analyst for Eilers Research, said he warned fantasy sports executives during a briefing in January that the industry was primed for a major public-relations scandal in the next year or so.

Among the pitfalls he warned about were a data breach, “rogue” companies pushing legal boundaries, or a cheating scandal in a high-profile game with big cash prizes.

Allegations of cheating are precisely what caused the current uproar, with a DraftKings employee winning $350,000 in a contest on rival FanDuel the same weekend that he unintentionally released some key internal player data a few hours early.

DraftKings and FanDuel have said their own internal investigations have shown no evidence of wrongdoing, and in fact that the data in question wasn’t available to the DraftKings employee until 40 minutes after he was locked out of entering FanDuel’s contest.

But the questions have surged since the incident happened two weekends ago, and the industry has lost the public perception battle, DraftKings chief executive Jason Robins acknowledged Wednesday.

The two companies have now banned their employees from playing “anywhere in the industry,” Robins noted.

“Our commitment has to be to take away any question, even if it’s one that we know from our own internal policies is something that we don’t worry about,” Robins said on ESPN. “It doesn’t matter. What matters is that everyone who’s playing needs to feel 100 percent safe.”

Krejcik, the analyst, said DraftKings and FanDuel “could have looked at other industries, and lessons learned, and safeguards.”

“We and others warned of this issue before,” Krejcik said. “There’s going to be bad publicity. It’s inevitable for an industry that crosses borders that people consider to be gambling, and one that is growing so quickly and visibly. It is disappointing that they didn’t put things in place to prevent this.”

Daniel Wallach, a gambling-industry lawyer with Becker & Poliakoff in Fort Lauderdale, Fla., was another observer to warn of potential problems in the industry. At an industry conference in May, Wallach predicted that demands for insider information about real-life players posed “the single greatest threat to the daily fantasy sports industry.”

“There’s nothing pernicious here by FanDuel or DraftKings that I suspect,” Wallach said Wednesday. “The real problem I see is that the temptation exists for experts and experienced players to work for these companies, knowing that there is this wealth of information within the company that they might be able to access.”

Some of the top fantasy players agree that it’s time to lock down a previously loose arrangement about industry insiders trying to win big jackpots.

Drew Dinkmeyer, a prominent professional fantasy sports player who has had a sponsorship deal with DraftKings, said that it was important in the early days to have expert players and enthusiasts involved in building the companies.

But today, the sector has outgrown those mom-and-pop roots, he wrote on fantasy analysis site DailyRoto. And tightening up the controls on employees playing the games, he wrote is just a “first step.”

“This doesn’t eliminate all risks. Employees could still share key information to friends who use it to play, but it does at least put up another hurdle,” Dinkmeyer wrote. “Ultimately, I think this is an opportunity for the industry leaders to re-shape the industry and firm up the policies and practices in place to make us stronger going forward.”