Editor's note: This story is revised from the print edition.
With legal challenges and government inquiries mounting by the day, the daily fantasy industry is enlisting a collection of powerful aides to assist with the legal and governmental scrutiny that threatens to change the face of the business.
The Fantasy Sports Trade Association, the most prominent trade organization for fantasy sports, is working with Finsbury, a global strategic communications firm experienced in regulatory and corporate crisis management. The alignment began during the summer but has stepped up in recent weeks in the face of widespread questions about the integrity of daily fantasy sports.
Industry powers DraftKings and FanDuel have each hired lobbyists and advisers. FanDuel’s recent hires include Washington-based lobbyists from Steptoe & Johnson, which has been active in online gaming issues and has ties to congressional committees that oversee the industry.
DraftKings’ legal counsel on incoming suits is Gibson Dunn & Crutcher, which also represented New Jersey Gov. Chris Christie in the “Bridgegate” investigation.
Both FanDuel and DraftKings have state-level lobbyists working on individual battlegrounds, such as Florida, where the two companies and the association have all hired government affairs team Ballard Partners and local news reports suggest a grand jury investigation there is reviewing the legality of daily fantasy.
Meanwhile, a collection of prominent industry executives that includes Todd Heyden, co-founder of Chicago-based fantasy sports company SportsLock, and Bob DuPuy, former MLB president and chief operating officer, are developing an internal industry advisory group called the Fantasy Gaming Commission. The ad hoc group, in the process of formal incorporation, seeks to develop guidelines for the daily fantasy business to regulate itself.
“My view is that it is always better to get in front of these issues as much as possible, so that’s what we’re trying to do,” said DuPuy, now an attorney with Foley & Lardner and an investor in digital and gaming startups, including SportsLock. “Being proactive is always better.”
The efforts come as the daily fantasy industry remains deep in crisis mode. The U.S. Justice Department and FBI have opened a formal investigation of daily fantasy, joining another by New York state Attorney General Eric Schneiderman, and several calls by legislators in Congress for hearings and additional oversight from the Federal Trade Commission. At least six civil lawsuits, some seeking establishment as class actions, have been filed against DraftKings and FanDuel.
Among the proposed measures for the Fantasy Gaming Commission are the creation of sport-specific rules for fantasy games beyond broad language within the Unlawful Internet Gambling Enforcement Act of 2006, which established fantasy as a game of skill, a standardization of dispute resolution processes, and additional guidelines around account management of customer funds in daily fantasy.
The creators of the commission intend for the new group to operate alongside the FSTA rather than compete with it. But their efforts also communicate a belief that the FSTA, even now with Finsbury’s help, has not met all of the industry’s challenges.
“Not enough is being done in the industry to get our arms around this,” Heyden said. “We need better policies in place. The FSTA definitely has a place in this. They should definitely have a role. But we want to do more to benefit the entire market.”
Adam Krejcik, Eilers Research managing director of digital and interactive gaming, and another figure in the developing FGC effort, said, “The idea here is to get some new voices heard and create some new ideas and best practices.”
The FSTA has largely been silent since revelations first surfaced publicly in late September of DraftKings and FanDuel employees winning large sums of money playing on each other’s sites, raising questions about the integrity of daily fantasy play. The organization earlier this month issued a joint statement with FanDuel and DraftKings about the need to protect fans, and applauded initial efforts by DraftKings and FanDuel. But it has not yet communicated any concrete industrywide reforms or pathways toward them.
Industry sources close to the FSTA said the organization plans to communicate with the aid of Finsbury more plans for industry reforms and policy changes before its winter conference in January.
“A lot is going on behind the scenes,” a source said, speaking on the condition of anonymity as they are not authorized to speak publicly on behalf of the FSTA. “There will be more disclosed well before January.”
The FSTA’s alignment with Finsbury adds to relationships the organization has with public policy group Orrick and government relations firm Dentons.
The hires supplement DraftKings’ and FanDuel’s initial steps to review their internal processes. Boston-based DraftKings has retained prominent law firm Greenberg Traurig to run an internal probe, while New York-based FanDuel has hired former U.S. Attorney General Michael Mukasey in a similar role.
As FanDuel, DraftKings and the industry at large develop responses to lawsuits and investigations, several industry sources said much of their challenge centers on sifting through which inquiries are legitimate and which are more politically opportunistic.
“It is entirely predictable that the government would follow up on misleading reports about our industry,” DraftKings said in a statement last week in response to the revelation of the Justice Department/FBI investigation. “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.”
Meanwhile, user interest continues to surge forward, with marketing still at extremely high levels and the number of entries growing. Data from industry analytics firm SuperLobby.com found that both DraftKings and FanDuel experienced their biggest weekends of the NFL season during the Oct. 10-11 weekend, after the daily fantasy scandal had exploded. A report from SuperLobby.com read that, “if anything, it may be that the ‘there is no such thing as bad publicity’ maxim has come into play.”
