WASHINGTON — Are daily fantasy sports companies such as FanDuel and DraftKings violating the law?
That’s the question the U.S. Justice Department and the Federal Bureau of Investigation want to answer in the wake of a scandal after a DraftKings employee won $350,000 on rival site FanDuel.
Boston-based FBI agents have been contacting DraftKings customers about their experiences with the daily fantasy sports company, although the investigation is still in its early stages, The Wall Street Journal reports.
Customers of daily fantasy sports sites pay entry fees to draft virtual sports teams, which then compete using the real-life performance of athletes in their sports of choice, often for prize money.
The Justice Department cracked down on online gambling sites in 2006. Sites such as DraftKings and FanDuel have since blossomed, however, because they are considered games of skill and thus exempt from those restrictions.
But now, the Justice Department wants to determine whether these fantasy sites are indeed gambling websites. The attorney general’s offices in New York and Massachusetts also have asked for information from the companies — New York seeking details about how the fantasy pricing works, Massachusetts working to put in place consumer protections.
Both companies have denied engaging in any illegal activity. FanDuel has hired an outside investigator to conduct an internal review to improve its controls on sensitive information. DraftKings is investigating unspecified allegations against an employee.
Big-name media companies such as Comcast and 21st Century Fox, which both own the NBC and Fox networks respectively, have invested hundreds of millions of dollars into these sites. Walt Disney Co., which owns 80 percent of ESPN and all of ABC, was planning to invest in DraftKings, but changed course earlier this year, instead maintaining a marketing deal.
