DFS Industry Scandal and Amaya’s Support For Regulation

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Monday, October 26th, 2015 | Written by Adam Brown

Daily fantasy sports (DFS) isn’t just turning up in television commercials these days, it is also turning up in news stories and in public statements from lawmakers who have growing concerns about the industry. While the current giants in the industry, FanDuel and DraftKings, are stirring controversy, a new arrival on the scene, StarsDraft, seems to be capitalizing on the problems its competitors are experiencing and promoting itself as a more reputable alternative to the sites.

What the Scandal Is About

For some time, people have been debating whether or not daily fantasy sports is actually betting. Even though professional sports leagues have managed to keep fantasy sports out of the restrictions put in place by the UIGEA of 2006, many people argue that DFS is much different than the season-long friendly competitions the exemption under the law were designed to protect. Nevertheless, the current DFS scandal started after the integrity of the game was questioned, following a DraftKings employee winning $350,000 on FanDuel, with many people comparing the win to insider trading as employees of DFS sites develop the algorithms that determine who wins.

A New Investigation

Following the revelation that one of their own employees won money from FanDuel, DraftKings issued a statement saying that all employees were banned from daily fantasy sports sites going forward. FanDuel issued a similar statement. Still, this and the growing debate over whether or not daily fantasy sports sites are gambling has led to calls for formal inquiries. New York Attorney General Eric Schneiderman has already announced that New York will begin investigating daily fantasy sports, and placed in charge of the investigation is none other than Preet Bharara.

Known as “The Enforcer of wall Street”, Preet Bharara is the U.S. Attorney best known for the Black Friday indictments, and his involvement should be enough to send shivers down the collective spine of the whole industry. As an excerpt from the Wall Street Journal, explains:

“U.S. Attorney Preet Bharara’s office in the Southern District of New York is investigating whether the business model behind daily fantasy-sports firms like DraftKings Inc. and FanDuel Inc. violates federal law, some of the people said. The investigation is at an early stage, they added, and even as New York prosecutors try to build their case, senior Justice Department lawyers in Washington are undecided on whether daily fantasy-sports betting violates federal gambling statutes.”

Furthermore, Nevada has already labeled DFS as gambling and now requires operators to obtain gaming licenses before offering their services in the state, while there are calls in other states for lawmakers to do the same. There is even some speculation that an investigation of DFS sites could occur at a federal level.

Enter Amaya

With all of the turmoil in the world of daily fantasy sports, one would think it’s a less than ideal time to try and launch a new site, but Amaya is forging ahead with their site StarsDraft. The new daily fantasy sports site has the advantage of not being affiliated with any of the misdealing of which FanDuel and DraftKings are accused, positioning the site to potentially take some of their market share. Amaya has been very careful to show that StarsDraft is and will continue to be a reputable site. In fact, the company has even made statements indicating that they support regulation of the daily sports betting industry, further separating them from DraftKings and FanDuel, which have adamantly opposed regulation.

It’s understandable that Amaya is determined to make the right moves with StarsDraft when you consider their past history. PokerStars, an online poker site owned by Amaya, was operating illegally in the U.S. until 2011 when the site was blocked. Now, Amaya has a chance to reenter the U.S. market with daily fantasy sports and can’t afford to be associated with any of the drama surrounding DraftKings and FanDuel.

Consequently, before the probe was announced, Amaya Gaming had already withdrawn its DFS platform from all but four US states with “favorable existing daily fantasy sports guidance”, namely Kansas, Maryland, Massachusetts, and New Jersey. There are even suggestions that Amaya may have acted as a catalyst for the investigations currently taking place in the DFS industry, as prior to its StarsDraft platform entering the US market, no other DFS operator existed with direct links to other iGambling products.