Fantasy sports industry tries self-regulation

NEW YORK - Nigel Eccles, the cofounder and CEO of FanDuel, one of two companies at the center of the fantasy sports storm, canceled his appearance Wednesday at a sports business conference here, but other industry leaders said they hope their new plan for a "control agency" will calm the situation.

Given that federal prosecutors and state attorneys general have reportedly launched investigations into the popular fantasy sports operations, the industry's move to police itself can be viewed as damage control and an attempt to avoid tight state and federal regulation.

In a fantasy sports league, participants choose real athletes for an imaginary team, with the real game statistics counting as points. Online daily fantasy sports has pushed to the forefront with FanDuel and DraftKings offering millions of dollars in prize money and spending millions on advertising on TV and digital platforms. Some fantasy sports players use complex data crunching to play hundreds of games each day.

Former acting U.S. Labor Secretary Seth D. Harris was appointed to run the Fantasy Sports Control Agency, an attempt at self-regulation for a young industry with few guidelines. The fantasy sports trade group says 55 million people play fantasy sports. While happy with the increase in players, the trade association is worried the growth has spun out of control.

"It is a crisis of confidence in the fairness of the game, but, materially, I don't think there was anything happening" with the companies that was inappropriate, said Peter Schoenke, president of Roto Sports Inc. and chairman of the Fantasy Sports Trade Association.

Schoenke appeared on a panel that replaced Eccles at the NeuLion Sports & Technology Conference sponsored by the Sports Business Journal at the Crowne Plaza Hotel.

"It always makes sense for an industry to try to provide some form of control and regulation, but it may be too little, too late," Michael Colangelo, assistant director of the University of Southern California Sports Business Institute, wrote in an email.

A 2006 federal law designed to curtail online gambling carved out a spot for fantasy sports. The law also labeled gambling a game of chance and fantasy sports a game of skill. Many - especially advocates of legalized sports betting, including New Jersey politicians - argue that that is a distinction without a difference. Still, it allows daily fantasy companies to operate legally and seek investors who can't touch sports betting.

But federal and state investigators are looking into whether company employees had access to information that they then used to win on other sports fantasy sites, perhaps harming the chances of victory for players without such inside information.

Major League Baseball was among the large investors in DraftKings, unaware that DraftKings employees were previously allowed to play on FanDuel. Other leagues, teams, and individual owners have business arrangements with DraftKings or FanDuel.

Comcast Ventures, a unit of Philadelphia-based Comcast Corp., invested in FanDuel in 2013. The Walt Disney Co., which owns ESPN and ABC, considered investing in both companies, but chose not to, ESPN president John Skipper said at the Philadelphia conference. Skipper said that he happily accepts advertising money from sports fantasy companies.

Schoenke, whose company produces the fantasy sports information website rotowire.com, said he hopes the DraftKings exoneration of one employee who reportedly used inside information proves justified.

"We need to have better rules and infrastructure going forward so there is no appearance of that," Schoenke said.

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