Full timeline: The DraftKings/FanDuel data scandal

October 7, 2015, 9:58 PM UTC

DraftKings and FanDuel, the two leading “daily fantasy sports” sites, were already plenty controversial before a new scandal brought them under even harsher scrutiny from regulators and the media.

This week, a DraftKings employee won big money on FanDuel. Ethan Haskell, a self-avowed “grinder” who wins money frequently in fantasy sports, placed second in FanDuel’s NFL Sunday Millions contest, winning $350,000. After a big New York Times story, there have been heated reactions from users, from partners like ESPN, and now from the New York Attorney General’s office, which has launched a probe.

As you follow this saga, here’s a handy timeline of everything that has happened thus far.

September 27: On A Sunday, before the day’s NFL games had started, DraftKings employee Ethan Haskell (who has previously worked at fantasy sports site RotoGrinders) accidentally posted the ownership data for the weekly DraftKings Millionaire Maker contest on the DraftKings blog. A commenter at RotoGrinders posted the link in a forum and called it “a big leak.” Haskell himself took to the same forum to respond: “This was published in error… I’ve fixed the error and we’ll be putting checks in place to make sure it doesn’t happen again… I was the only person with this data and as a DK employee, am not allowed to play on site. 100% my fault and I apologize.”

The issue, of course, is that although DraftKings employees were not allowed to compete for money on DraftKings, they were allowed to compete on FanDuel, and vice-versa. (The two sites have now temporarily changed that rule and banned employees of each from using the other.)

October 4: FanDuel’s NFL Sunday Millions contest wraps up when Sunday’s NFL games end; Haskell places second overall and wins $350,000. Click here to see his winning lineup, under the username haskele, which included a balance of popular players and under-the-radar picks.

If Haskell had access to DraftKings ownership data before selecting his lineup in the FanDuel contest—as the Times reported, it would have given him the competitive advantage of knowing which NFL players were likely to not be selected by many users in the FanDuel contest, since the two sites function so similarly.

October 5: DraftKings and FanDuel release a joint statement on the incident, posted both to the DraftKings and theFanDuel website:

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.

(It’s worth noting that for whatever reason, FanDuel’s version contained an extra clause at the beginning that was not in the DraftKings version: “While there has been recent attention on industry employees playing on FanDuel and DraftKings,” the first sentence started.)

October 5: The Times trumpeted its story as a major, breaking scoop—complete with an NYT mobile alert—under the headline “Scandal erupts in unregulated world of fantasy sports.” While the data leak had happened the previous week, it had not been widely noticed until the Times story.

DraftKings confirmed to the Times that Haskell released the ownership data by mistake, but categorically denies that he saw the data before selecting his FanDuel lineup.

DraftKings and FanDuel, both billion-dollar tech “unicorns,” have been acquiring users like crazy (but spending like crazy on advertisements to do so) and the marketing blitz had already prompted many to wonder whether their daily “contests” constitute gambling. The answer is that at a federal level, they’re okay for now, under the Unlawful Internet Gambling Enforcement Act of 2006; at a state level, 45 states allow them as “games of skill” while five states disagree.

October 5: DraftKings, late on Monday night, released a second statement that addressed the growing firestorm head on, insisting that FanDuel lineups locked before Haskell had seen the ownership data that would have helped him. The statement also called into question the Times story, which hinged on the idea that Haskell did see the DraftKings data before choosing his FanDuel lineup:

There has been some confusion regarding a recent piece of data that was inadvertently posted on DraftKings’ blog containing information about players and fantasy games. Some reports are mischaracterizing the situation and implying that there was wrongdoing. We want to set the record straight. For the last several days, DraftKings has been conducting a thorough investigation, including examining records of internal communications and access to our database, interviewing our employees, and sharing information regarding the incident with FanDuel. The evidence clearly shows that the employee in question did not receive the data on player utilization until 1:40 p.m. ET on Sunday, September 27. Lineups on FanDuel locked at 1:00 p.m. that day, at which point this employee (along with every other person playing in a FanDuel contest) could no longer edit his player selections. This clearly demonstrates that this employee could not possibly have used the information in question to make decisions about his FanDuel lineup. Again, there is no evidence that any information was used to create an unfair advantage, and any insinuations to the contrary are factually incorrect.

October 6: DraftKings and FanDuel release a new statement in tandem with the Fantasy Sports Trade Association, a group founded in 1999 to represent the interests of this growing industry:

The Fantasy Sports Trade Association (FSTA), DraftKings and FanDuel have always understood that nothing is more important than the integrity of the games we offer to fans. For that reason, the FSTA has included in its charter that member companies must restrict employee access to and use of competitive data for play on other sites. At this time, there is no evidence that any employee or company has violated these rules. That said, the inadvertent release of non-public data by a fantasy operator employee has sparked a conversation among fantasy sports players about the extent to which industry employees should be able participate in fantasy sports contests on competitor sites. We’ve heard from users that they would appreciate more clarity about the rules for this issue. In the interim, while the industry works to develop and release a more detailed policy, DraftKings and FanDuel have decided to prohibit employees from participating in online fantasy sports contests for money.

October 6: ESPN announces it is yanking all DraftKings sponsored segments. However: it used the term “temporarily,” and it is not pulling DraftKings and FanDuel advertisements, which are running so frequently on the network that at times viewers are seeing back-to-back ads for the two sites. So, what this means: ads will continue, but for now, you won’t hear hosts say things like, “You’re watching NFL Insiders, sponsored by DraftKings.” It also means that while ESPN isn’t ready to back away from these sites (it has a lucrative long-term marketing deal with DraftKings that becomes exclusive in January), the network is jarred by the current negative attention.

October 6: NY Attorney General’s office sends letters to Robins and Eccles, launching an inquiry into DraftKings and FanDuel. In letters sent by his office to DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles, he requested the names of the employees that collect user data—the data that Haskell inadvertently released last week—and records, from the past year, of any money won by employees of each on the rival site. The 2-page letters include 9 different bullet points requesting responses or specific information. “The integrity of FanDuel… and its policies and practices are matters of concern to the public, particularly to the many customers who put money at risk on your site,” the FanDuel letter says.

Other lawmakers had already recently requested inquiries into these companies. In early September, Frank Pallone, a U.S. Democratic congressman from New Jersey, called for a hearing on the legality of fantasy sports. Days later, Massachusetts attorney general Maura Healey said her agency was also looking at the legal issues. That shows pressure from both sides: Pallone has advocated legal sports betting in his state; Healey is a vocal opponent of gambling.

October 7: DraftKings CEO Jason Robins appears live on ESPN’s “Outside the Lines” and host Bob Ley grills him on a number of issues. Robins acknowledges that employees having access to ownership data and playing on either site is not fair, but insists, again, that Haskell did not, in this case, see the data before setting his FanDuel lineup. Robins called the Times story “bad reporting.” He also told Ley, “We are committed to having a completely transparent and open environment” so that users know the playing field on both sites is “fair.” Robins added that DraftKings has engaged San Francisco law firm Greenberg Traurig to investigate and produce a report that DraftKings will make public.

October 8: DraftKings CEO Jason Robins gives a candid interview to Fortune in which he answers questions about the scandal and what the company will do to correct its problems. Read it here.

October 8: A Kentucky man filed a class action lawsuit in Manhattan court accusing both DraftKings and FanDuel of negligence and fraud.

October 9: DraftKings cofounders Jason Robins, Matt Kalish and Paul Liberman send the following email to all registered DraftKings users:

As the three co-founders of DraftKings, we want to speak to you directly about what has been going on.

We know that you play DraftKings because it’s fun and because it gives you a chance to showcase your skills against millions of other fans, and we know that you cannot do that without a level playing field.

The fairness and integrity of our contests has been at the heart of everything we have built since we started the company three and a half years ago.

Over the past week, questions have arisen around an employee of ours who won a significant prize on a competitor’s site. While our internal investigation has reflected absolutely no wrongdoing on his part, this has still pushed us to reevaluate our processes.

Long before this happened, the wheels were in motion for an external review of our policies and procedures. Given the pace of our growth, we felt that an audit was critical to ensure the security of our platform, so we hired an external law firm experienced with these issues to conduct a full review.

But that is not enough. In addition to this audit, we have put in place a set of core measures that we believe are central to this process:

We expanded our existing policy prohibiting DraftKings employees from playing on our site to prohibit participation in any public daily fantasy sports contests for money.

We also will prohibit employees from any other Daily Fantasy Sports contest operator from participating in games on DraftKings.

We are actively reviewing our organizational structure and will add resources to ensure compliance with all recommendations stemming from internal and external findings.

We are working with multiple third parties to strengthen all internal policies and procedures.

The events of the past week have caused us to take a broader look and to ask those both here and externally to widen the scope of their analysis of our business.

We are aware that there is room for growth, regardless of the strength of our current platform. We will work tirelessly to improve all aspects of our customer experience, which is every bit as important to us as the effort we put into our product.

You will no doubt continue to hear from the media about both DraftKings and the industry. It is our prerogative to keep driving that conversation ourselves. We will work to respond to your concerns in complete transparency and to inform you of the steps we are taking to inspire your full trust.

Please know how grateful we are for the passion and loyalty you have shown DraftKings throughout our history and especially over the past week. You remain our greatest priority.

October 14: The Wall Street Journal reported that the Federal Bureau of Investigation, in conjunction with the U.S. Department of Justice, has launched an inquiry into the daily fantasy sports industry. It began by contacting DraftKings users to ask about their experiences using the site.

October 15: The Nevada Gaming Control Board rules that daily fantasy sports platforms constitute gambling, and thus need a gambling operator’s license to offer service in the state; it orders these companies to cease and desist unless and until they get licensed. DraftKings and FanDuel are not legal in Nevada.

Fortune will no longer update this timeline, as this particular scandal appears to have concluded. That is: the legal scrutiny of DraftKings and FanDuel continues, and has only gotten louder, but it no longer centers on, or has much to do with, the issue of “insider play.” Now, government agencies and lawmakers in various states are reviewing whether daily fantasy sports contests constitute illegal gambling or not. While the fuss sparked by Ethan Haskell certainly brought extra negative attention, it is now somewhat resolved.

Did this scandal matter? Our writers are somewhat split. Dan Primack believes this scandal really mattered, because it will hurt the companies’ ability to attract new users; I believe this particular scandal won’t matter that much—Haskell’s success only reinforces the argument that these games do require skill.

For more background on these two companies, read:

Are DraftKings and FanDuel legal?

The significance of NFL players appearing in DraftKings ads

FanDuel vs. DraftKings: Which is bigger?

Read More

Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward