In Connecticut, you can legally bet on horse and dog races, but place a wager on the World Series and you’ll be breaking the law. The federal Unlawful Internet Gambling Enforcement Act of 2006 put the kibosh on most sports betting, but fantasy sports sites were excluded from the law. Now an explosion of betting on fantasy sports is drawing scrutiny from Connecticut Sen. Richard Blumenthal.
Following the announcement of an FBI investigation into the nation’s two largest fantasy sports sites, FanDuel and DraftKings, Blumenthal is calling on the Department of Justice and the Federal Trade Commission to investigate what he calls fraudulent practices.
“The FBI investigation is a welcome step toward protecting fantasy sports players from rigged games and fraud,” Blumenthal said in a prepared statement last week.
The Fantasy Sports Trade Association reported that in 2015 there are 56.8 million people playing fantasy sports in North America, and the onset of betting on fantasy football in particular has turned it into a huge business.
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Analyst firm IBISWorld reported this year that fantasy sports is a $2 billion industry in the United States.
The FBI began its investigation after a mid-level employee at DraftKings allegedly released information on football lineups early, and was then able to place a wager at a competitor’s site and win, reaping a profit of about $350,000, according to the New York Times.
“The investigation of such wrongdoing should be completed as promptly as possible, so every player is assured a level field and legal action taken against lawbreakers,” Blumenthal said. “In the meantime, sites themselves should maintain their ban on employees playing, while they establish a permanent overseer.”
The investigation comes at what may be a politically pivotal moment for sports betting in general, and fantasy sports betting in particular. Gaming regulators in Nevada — the only state in which betting on individual sporting events is legal — ruled last week that fantasy sports should be treated as gambling.
That means, ironically, that betting on fantasy sports is explicitly illegal in Nevada, according to an opinion written by the state’s attorney general.
“In short, daily fantasy sports constitute sports pools and gambling games,” the opinion reads. “As a result, pay-to-play daily fantasy sports cannot be offered in Nevada without licensure.”
Blumenthal, in his letter to the FTC and DOJ, said the federal government should make sure consumers aren’t being swindled, and that executives at daily fantasy sports sites should be held accountable if malfeasance is proven.
“Consumers expected these sites to function in a fair, transparent and impartial manner,” he said. “I urge the Department of Justice to investigate these practices and determine whether any executives or employees engaged in fraudulent activities or made false statements in selling, advertising or providing access to these online ‘tournaments.’ As you know, if employees are using insider information to unfairly advantage themselves over others, this may constitute fraud regardless of any other federal or state gambling statutes.”
Jordan Fenster can be reached by or @JordanFenster on Twitter.