The FBI and Department of Justice are reportedly in the early stages of launching an investigation regarding the legality of daily fantasy sports and the results could have dramatic effects.
Just the Beginning?
The Wall Street Journal reports FBI agents from the Boston office have been contacting customers of DraftKings as part of their preliminary investigation. The U.S. Department of Justice is also beginning their inquiry into the legalities of daily fantasy sports as it pertains to the Unlawful Internet Gambling Enforcement Act (UIGEA). The operators of daily fantasy sports sites insist that the contestants compete in a game of skill rather than chance which is the basis of their argument that allows them to avoid the immense pall that the Act has cast over the sportsbook industry making it illegal for offshore bookmakers to accept bets emanating from the United States.
"It is entirely predictable that the government would follow up on the misleading reports about our industry," a DraftKings spokesperson said in a statement. "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."
The scrutiny began when a DraftKings employee allegedly used confidential information from his site to create a lineup at competitor FanDuel that took second place and captured a $350,000 prize. The fallout was immediate with the filing of four class action suits as well as attracting the attention of law enforcement. It is unclear where the investigation will go and whether or not industry leaders DraftKings and FanDuel will ultimately be deemed in compliance with the law.
However, what we can foresee with relative clarity is a more regulated industry with government oversight in the future. As of this moment it is business as usual for millions who enjoy participating in daily fantasy sports contests but this story is only in its infancy so stay tuned to SBR for further developments.