Matter Chatter

Fantasy Football Sites Flagged for Infraction

Fantasy Football Sites Flagged for Infraction

A Crisis Communications Two Minute Drill

Forget the overheated real estate market. Never mind the S&P 500. That massive bubble that seemingly formed overnight – the uber frothy, multi-billion dollar daily fantasy sports industry – is about to burst.

And by burst I certainly don’t mean it will crash to its death before the MLB playoffs start tonight or prior to kick-off of this weekend’s NFL games.

But some big rule changes could be coming.

The New York Times broke a story this morning that many industry observers are equating with “insider trading.”

At the center of this storm is a DraftKings.com employee, who revealed nonpublic data prior to the start of National Football League games last weekend — and presumably using this information, pocketed a cool $350,000 at rival site FanDuel.com.

These two kingpins of their industry – DraftKings and FanDuel, and as well as other big media companies including Yahoo Sports, CBS, ESPN and others have been allowed to exist due to situation created by a nearly decade old law. Congress allowed an exception to sports gambling laws for fantasy leagues when it wrote the Unlawful Internet Gambling Enforcement Act of 2006. In those dark ages, fantasy leagues were informal, season-long contests, usually between friends or co-workers. They had not evolved into a mega industry that they are today with huge money spent on intricate partnerships between these entities and major sports leagues, TV networks and media conglomerates.

Now, it’s quite possible that a horde of regulators are about to swoop in and take a very careful look at the business practices at FanDuel.com, DraftKings.com and others who’ve invested heavily in advertising, marketing and promotion and attracted huge capital investments. The investigative work that could ensue might well make Deflategate and all the billable hours and millions of pixels and gallons of ink devoted to that ten-months and counting odyssey look like an exhibition game.

I doubt that the government has a “two minute drill” in its playbook. And unlike the meteoric growth enjoyed by fantasy sports sites, perhaps a more measured approach is the correct play call here. Regardless, it’s possible the feds and maybe their state and local counterparts will take action and, in the spirit of fair play, demand some major rule changes to how sports industry companies operate and enforce new rules for employees, partners and players.

As that plays out – and it could take months if not longer – how should arch-rivals DraftKings and FanDuel respond from a communications standpoint? They’ve taken an initial step issuing the following joint statement:

“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it. However, we continue to review our internal controls to ensure they are as strong as they can be. We also plan to work with the entire fantasy sports industry on this specific issue so that fans everywhere can continue to enjoy and trust the games they love.”

Okay but how about something with some teeth?

Here’s a two-minute drill with five straight-forward “play calls” designed not to end the fantasy sports game, but to make some all-important half-time adjustments:

  1. Change the ‘temporary’ ban levied by DraftKings and FanDuel on all employees which currently forbids them to play in rival leagues by making it permanent. Further, create an outside audit function to ensure they don’t violate this rule.
  2. Proactively schedule a sit down with federal and state regulators to open up the books, explain policies and demonstrate a forward-looking business plan that includes safeguards for situations like the one described above. Communicate with all stakeholders the high points of these disclosures to restore credibility and fairness.
  3. Appoint a security czar charted with developing a comprehensive plan for safeguarding data from both “insider” abuse and external threats. This arguably should have happened months ago. Hello Ashley Madison hack.
  4. Broadly and publicly articulate a strategy for dealing with violators – punishment, penalties, repercussions, fines, loss of employment and disclosure to law enforcement.
  5. Augment this with an independent “competition” committee charged with ensuring that all of the above are followed in meticulous fashion.