Insider Trading Inside Daily Fantasy Football


The NFL Code of Conduct states that “All persons associated with the NFL are required to void ‘conduct detrimental to the integrity and public confidence in the National Football League’. This requirement applies to players, coaches, other team employees, owners, game officials and all others privileged to work in the NFL.”

In April of 2015, 15 NFL teams announced their support for daily fantasy football sites such as DraftKings and FanDuel. These sites are web-based fantasy sports games where people choose a lineup of players in the NFL and win money based on player performances. Cost of the players and payout are based on ranking and statistics, which come from an algorithm these companies use to determine how popular a player is among other line-up entries and how they typically perform. The model is similar to the traditional fantasy sports leagues people participate in using popular hosting sites like NFL or ESPN, but instead is compressed into a daily or weekly game. This lets people win money every week, rather than waiting to see who wins in the Superbowl faceoff.

The concept is a good idea in that it seems to be a win-win for all. The sites have been successful, more people are paying attention to the actual games, helping media conglomerates, and people are winning money. Big Money. Unfortunately, the sites have been dealing with backlash in the press due to ethical concerns. Should employees be allowed to bet using the competitor’s site to win money? The big question seems to be whether or not these sites are in violation of federal gambling laws. But my question is, should fantasy football actually be considered gambling?

Gambling is considered a game of chance and probability. There is very little research that can be done to increase your probability. It is more about techniques and taking risks based on numbers that are already determined. Unless you are an inexperienced fantasy footballer, I don’t think anyone would go into a draft without any knowledge of any players on any teams. That is why sites like Draftkings and Fanduels shouldn’t be considered gambling, but rather an alternative investment, similar to investing in stocks, which is a completely different game. Investing requires hours of research; considering appropriate mixes of investment; taking risks and analyzing how players will perform against their opponent each week, as well as using current season statistics and projections.

I’m sure most of you have heard about Martha Stewart’s trip to the slammer due to the receipt of nonpublic information about ImClone Systems and the actions she took after receiving the information. M. Diddy (as she was referred to in jail) avoided a loss of $45,673 as a result of the tip and after she sold her shares, the stock fell 16%. She received this tip not from an employee at the company, but her own broker. Insider trading is the trading of a company’s stocks or other securities by individuals with access to confidential or non-public information about the company. By this definition, the employees of these daily fantasy sites who have been playing the game have been in fact conducting insider trading and should be held accountable.

One example is DraftKing’s employee, Ethan Haskell who won $350,000 from FanDuel. This prompted inquiries into Fantasy Football’s ethical legitimacy. After further investigation, Haskell was cleared of wrongdoing stating that he locked in his winning roster 40 minutes prior to receiving relevant information. The subject appears very sketchy, since timing is so close. Several questions regarding this matter come to mind including, could Ethan have backdated his lineup? Or did he somehow get a look at relevant information prior to its release to the company? DraftKings is currently conducting their own investigation into this matter, but it still raises the questions; did he use prior week’s information that wasn’t viewable to the public? Even if he didn’t use information for that week to place his bets, his insider information into the workings of the website’s algorithms gives him an unfair advantage over the rest. Coaches, Players, Managers, Owners and those associated with professional sports are not permitted to bet on sports and have been penalized for doing so. Subsequently, DraftKing and FanDuel employees should not be permitted to use or share private information that could give anyone an unfair advantage.

While Martha Stewart was only going by what her broker advised and never told information directly by Imclone, she was held accountable for using insider trading to sell her shares. In addition to playing themselves, employees should be held accountable for “tipping” friends about non-public information. Martha Stewart, her Broker and the CEO of Imclone were all given prison sentences for their involvement in the crime. Employees and their associates should be held to the same standard.

On the DraftKing’s website, the company has an entire page dedicated to proving that daily fantasy football is a game of skill and is not considered gambling. I agree it shouldn’t be considered gambling, but rather stock trading for sports fanatics. Like the stock market, there needs to be regulations and rules in place to maintain the integrity of the sports betting industry.