Fantasy sports is a big business in the U.S., expected to generate $2.6 billion in contest fees this year.
But its future is looking a little less bright this week, now that New York Attorney General Eric Schneiderman is investigating allegations that employees of two major fantasy sports sites have made money using company information not available to the public.
DraftKings and FanDuel have until Oct. 15 to present Schneiderman a range of internal data and details about how they prevent fraud.
Here's what you need to know about the investigation:
► Schneiderman is only the latest public official to take issue with daily fantasy sports sites. It's debated whether fantasy sports — in which competitors pay an entry fee (from 25 cents to $1000) to create a roster of real-life players and collect prizes based on how well their "team" performs on the field — constitutes illegal sports betting. Legislation passed in 2006 prohibiting online gambling made an exception for fantasy sports because lawmakers said it required more skill than luck. But that was before daily fantasy sports became a billion-dollar industry.
► The attorney general's inquiry came after a New York Times story alleged that a DraftKings employee, Ethan Haskell, may have used information from his company to win $350,000 at the rival site FanDuel. The information Haskell supposedly used was the percentage of fans who had picked certain players for their teams. Prior to the Times' report, the firms had allowed their employees to play for money at each other's websites.
► On Wednesday, FanDuel announced it was permanently banning its employees from playing fantasy sports games on any site and prohibiting its competitors' employees from playing on theirs. It also announced the hiring of former federal judge and U.S. Attorney General Michael Mukasey to "review the facts and evaluate our internal controls, standards and practices." DraftKings said Wednesday morning that it has enlisted a third-party law firm to review the findings of its internal investigation. Both companies deny wrongdoing.
► As for the industry's sponsors, they're looking into the matter and distancing themselves from it. Major League Baseball, which owns a stake in DraftKings, put out a statement saying it's discussing the issue with the company. ESPN will continue to air ads for FanDuel and DraftKings, but the network will no longer run individual segments sponsored by them. Other investors in the sites include Fox Sports, Comcast, NBC, the National Hockey League and the National Basketball Association.
► So how should fantasy sports be regulated in the future? The Fantasy Sports Trade Association has said that the industry is working on a more detailed policy regarding whether employees should be able to participate in contests on competitor sites.
