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Sources: DOJ, FBI Investigating Legality Of Daily Fantasy Firms' Business Models

The U.S. DOJ and FBI "are probing whether the business model of daily fantasy-sports operators violates federal law," according to sources cited by Reagan & Barrett of the WALL STREET JOURNAL. A source said that Boston-based FBI agents "have been contacting customers of DraftKings Inc. to ask them about their experiences with the Boston-based company." Sources said that the probe is "in the preliminary stage" and "part of an ongoing discussion within the Justice Department about the legality of daily fantasy sites." A DraftKings spokesperson in a statement said, "It is entirely predictable that the government would follow up on the misleading reports about our industry. We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities." Sources said that the Massachusetts Attorney General’s office "is in talks" with both DraftKings and FanDuel "over putting in place proper consumer protections" (WALL STREET JOURNAL, 10/15). In N.Y., Drape & Williams in a front-page piece report the FBI "began contacting several prominent competitors" in DraftKings contests. The players said that they "were interviewed by agents from the bureau’s Boston office, who seemed to focus primarily on DraftKings." They added that agents "were examining whether the site encouraged and accepted deposits and bets from states where the contests were prohibited." The players said that FBI agents "also wanted to know whether employees of DraftKings passed on proprietary information or preyed on fantasy players in contests" (N.Y. TIMES, 10/15). In Boston, Borchers & Murphy note the investigation "marks the first time the federal government has officially begun to evaluate the industry’s legal status" (BOSTON GLOBE, 10/15).

GETTING POLITICALLY CORRECT: POLITICO's Tony Romm noted FanDuel CEO Nigel Eccles "downplayed" any "political threat this week, stressing that his company isn’t scaling back its growth plans -- and insisting that the fledgling, largely unregulated industry has some big numbers on its side." Eccles, speaking at the Internet Association conference in Menlo Park, Calif., said daily fantasy sports are "played by 57 million people in the United States, including many legislators, and we find that to be beneficial." He described the opposition to daily fantasy sports as mostly a "social issue." He added, "Our attitude is, we operate in every jurisdiction that we can." Eccles: "Companies in this industry are startups, (and) they've grown incredibly quickly. That being said, these questions coming up is not a surprise." Filings show that FanDuel recently "signed up Steptoe & Johnson as its first federal lobbying hire" (POLITICO.com, 10/14).

(DAILY) FANTASY WORLD
: GRANTLAND's Charles Pierce wrote having "completely unregulated multibillion-dollar industries is not a good thing for either an advanced democracy or an advanced economy." It is "time for the leagues themselves, and the teams belonging to them, to get out of bed with this industry." By any "reasonable definition of the term, daily fantasy leagues are a form of gambling" (GRANTLAND.com, 10/14). The GLOBE & MAIL's Adrian Myers writes barring consumer fraud, there is "not much of a basis for prohibiting this kind of behaviour as a public matter." If customers think that the games "are rigged against them, they'll stop playing, and FanDuel and DraftKings will stop making money." In the end, "the best regulators of FanDuel and DraftKings may very well be FanDuel and DraftKings" (GLOBE & MAIL, 10/15).

A COUP ON THE KINGS? Montreal-based Amaya Inc., which operates the fantasy sports site StarsDraft.com, said the self-regulatory practices the industry has undertaken "have fallen short." In Las Vegas, Howard Stutz notes the company, which was at one point "viewed as the No. 3 daily fantasy sports operator behind DraftKings and FanDuel," was "reintroduced as StarsDraft before the kickoff of the NFL season." Yahoo's daily fantasy sports website "has since become the third most popular location." Amaya VP/Corporate Communications Eric Hollreiser said that gaming regulators in the U.S. "need to 'adopt tougher restrictions that safeguard players and institute controls' with daily fantasy sports websites." He added, "We are launching an active effort to work with states to enact legislation that meets the consumer protection interests of all parties" (LAS VEGAS REVIEW-JOURNAL, 10/15). Meanwhile, in Miami, Nancy Dahlberg reported locally based Synkt Games has launched a new daily fantasy app entitled letsRUMBL, which "is offering a user experience that is designed for the casual sports and gaming fans that want a real chance to win prizes" (MIAMIHERALD.com 10/14).

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