The chief executive of DraftKings Inc. on Wednesday mounted a spirited defense of his company’s handling of a controversial internal data leak, while Massachusetts Attorney General Maura Healey said she will press the two leading fantasy sports operators to take additional steps to protect consumers.
DraftKings cofounder Jason Robins, in his first extensive interview since the data leak, told The Boston Globe that his is “a very ethical company” that sports fans can trust to handle their money and to run fair contests.
The furor in the booming fantasy sports business has centered on a DraftKings employee who prematurely released data on player selections and subsequently won $350,000 playing on rival FanDuel Inc. While Boston’s DraftKings has insisted the events were not connected and the employee did nothing wrong, some contestants and public officials said the episode raised questions about the integrity of the company’s games if its employees had access to information that could give them an edge when playing.
Both DraftKings and New York’s FanDuel on Wednesday said they had banned their employees from playing on rivals’ sites.
The attorney general’s office is pressing for greater consumer protections. “I do think it’s right that people are a little bit miffed today,” Healey said, that contestants felt “they were literally playing against the house, and not surprisingly the house made out pretty well in this instance.” Her remarks came during an appearance on the Globe’s “Political Happy Hour” event at Suffolk University Wednesday evening.
Healey also questioned whether DraftKings was suffering from growing pains as the young company rushes to capitalize on the sudden popularity of its games. The industry says some 57 million people in North America play, and analysts estimate that in the first week of the NFL season this year contestants paid $60 million in fees to play games.
“Maybe it’s because they’re a new industry and didn’t create the kind of policies and practices you want to have in place as you grow, to make sure consumers aren’t taken advantage of, or aren’t duped,” Healey said. “Whatever the reason, the point now is let’s get it right.”
Healey said she will question DraftKings and FanDuel executives about steps to reassure contestants the games are run fairly. On Tuesday, New York Attorney General Eric Schneiderman opened an investigation into whether employees of the companies have access to player data that gives them an unfair advantage when entering contests.
But in his interview with the Globe, Robins said DraftKings retained a prominent law firm to review its internal controls weeks before the incident, a reflection of its commitment to keep everything on the level. He forcefully argued that his company does not need outside pressure or government regulation to police itself.
Perhaps the best evidence of the company’s principles, Robins argued, is its decision not to fire the worker responsible for the leak. Though the employee, Ethan Haskell, will be disciplined for his error, Robins said he refuses to scapegoat someone whom the company has determined did not use that information to his advantage.
“I don’t care if people give me all kinds of heat for it,” Robins said. “I had so many people tell me the simple thing to do is just fire him. I said, ‘It’s wrong.’”
On Sept., 27 Haskell released data showing which NFL players had been selected for fantasy rosters by DraftKing contestants before submissions for that week’s games had been closed. That outraged some contest entrants, who noted the information could give an edge to competitors who saw it before finalizing their picks.
Further stoking concern, Haskell won $350,000 playing in a fantasy football contest on FanDuel the same weekend.
Robins said he is convinced Haskell’s leak and his winnings were coincidental — that Haskell had submitted his final roster to FanDuel before he gained access to, and improperly posted, the DraftKings data. Robins shared computer logs supporting his conclusion with the Globe.
‘We’re going to fulfill our commitment to create an open and transparent environment, to put the right policies and procedures in place . . . ’
But he acknowledged the “optics” are bad and could make fantasy sports contestants question if DraftKings or FanDuel employees are using inside information to gain an edge when making entries of their own.
Robins even said he previously had “some reservations” about employees entering fantasy sports contests for cash prizes and privately suggested his company and its rivals restrict the practice.
Both companies had long prohibited employees from playing on their own sites but allowed them to enter contests run by the other. On Wednesday, each instituted a permanent ban on their employees covering cash games on all fantasy sites.
The move may help put skeptical gamers at ease, but regulators and lawmakers appear unconvinced the fantasy sports industry is capable of policing itself.
Governor Charlie Baker said Wednesday that “the right strategy for the Commonwealth . . . is to give the attorney general an opportunity to look at this and sort of define the rules of the road.”
House Speaker Robert DeLeo said the Legislature would wait for recommendations from Healey and state Treasurer Deb Goldberg before deciding whether to impose new oversight of fantasy sports.
He listed the state lottery and the Massachusetts Gaming Commission as possible regulatory authorities.
In all but a handful of states, fantasy sports companies are exempt from gambling restrictions because of a special carve-out in federal law. Fantasy contests are classified as games of skill, not chance — different from traditional sports betting, which is illegal throughout most of the country.
Robins said regulatory decisions are ultimately out of DraftKings’ hands but that the company will be “open to, and accepting of, regulations put on us.”
However, external checks are not needed, he emphasized.
“Regardless of whether that happens, we’re going to do the same thing,” Robins said. “We’re going to fulfill our commitment to create an open and transparent environment, to put the right policies and procedures in place to cover all the key issues. We’re going to continue to try for the rest of our company history to improve all those key areas.”
Robins also said he and his team were capable of managing the fast-growing private company and had the confidence of the board.
“They’re pretty happy with me right now,” he said.
Adam Krejcik, a gambling and fantasy sports analyst for Eilers Research of Anaheim Hills, Calif., said he warned industry executives their business was primed for a scandal.
“It’s inevitable for an industry that crosses borders that people consider to be gambling, and one that is growing so quickly and visibly,” Krejcik said. “It is disappointing that they didn’t put things in place to prevent this.”
Daniel Wallach, a gambling and sports law attorney at Becker & Poliakoff in Fort Lauderdale, Fla., argued the data leak has essentially cost the fantasy sports companies their exemption from government oversight. “Make no mistake about it: The ability of the daily fantasy sports companies to control the narrative has expired,” Wallach said. “They’ve had a year and a half to two years to institute controls and safeguards, and they failed miserably.”Callum Borchers can be reached at email@example.com. Follow him on Twitter @callumborchers.