#Facts About the #DraftKings Data leak

name of site - hunter thompson style

1. It’s a Matter of Trust

Fantasy sports is huge.  Commercials are everywhere, every sports program/channel are being co-opted with who you should have in your lineup.  Then word comes down something is amiss.  It’s not gambling, just like it’s not fraudulent for an employee to use insider-information to profit over $300,000.  The reason it’s not fraud, is because it is not regulated, but it will be now and scrutinized like a collection agency.

According to my sources, and Chris Grove, these are the facts from Legal Sports Report:

  • The leaking of player lineup data at DraftKings has sparked a community-wide conversation spanning employee access to player data, game integrity, and the effectiveness of quasi-self-regulation in the DFS industry.single logo_small
  • Below is a collection of what’s known, answers to common questions, and potential implications around the #DKLeak.
  • DFS Report was first to report on the issue, which was originally noted in a Rotogrinders thread.

The story, in a nutshell

Here are the broad strokes of #DKLeak:

  • Last week, a DraftKings employee inadvertently released data regarding DraftKings’ biggest contest — the Millionaire Maker — prior to the start of all the NFL games involved in the contest.
  • The data showed the prevalence of particular players across all submitted lineups for the contest. For instance, in this example, Patriots wide receiver Julian Edelman was the most common player selected, appearing in 37 percent of the lineups that were entered.
  • This kind of data is posted regularly, but never until all games in a given contest have started and all lineups are finalized.
  • Access to this kind of data prior to the start of a contest would provide a DFS player with a massive edge over players lacking such data.
  • Employees at DFS operators are not prohibited from playing at other DFS sites. To wit: the person who posted the DraftKings data early — DraftKings written content manager Ethan Haskell — won $350,000 at FanDuel the week of the data leak.
  • There is no indication, evidence, or formal accusation that Haskell’s win is in any way related to his access to data, nor is there proof that Haskell had access to data at a point that would have provided him with an advantage. Haskell and others have denied any wrongdoing. But the mere optics of the situation are driving some of the broader concerns.
  • Players and observers are now raising questions about exactly who inside DFS operators has access to competitively valuable data, what safeguards are in place to prevent abuse, and whether the industry’s self-regulatory approach is sufficient to identify and mitigate these and similar threats.

single logo_smallHow does access to ownership data provide an edge?

Ownership percentage is one piece of the puzzle that can be useful in skillfully setting DFS lineups, especially in guaranteed prize pool contests. Top players try to predict ownership percentages, and data about past ownership percentages can be dissected for information.

Because of the massive number of entries in the biggest contests at DraftKings and FanDuel — hundreds of thousands — it’s usually difficult to win a contest with a lot of players that are commonly owned. Rostering some players with low ownership percentages and a high upside is astrategy that many players employ.

Ed Miller, an independent games consultant who has written frequently about DFS, says that it’sdifficult to overstate the value of lineup data.

“If you knew beforehand which players would be most used, in the major sports you can build +EV (positive expected value) cash game and GPP lineups based almost solely on that knowledge,” Miller told Legal Sports Report.

single logo_smallWhy the question of access to insider data is a critical one

First and foremost, should the data in question be available at all? As DFS Report put it:

If this sort of information is stored in advance like this who is to say that the data isn’t available to someone 5 minutes before kickoff of games or 10 minutes before the kickoff or even an hour before the initial kickoff. My point is if the data can be accessed in advance then it is not hard to see it could easily be accessed at other points in advance even before the tournament is live.

If the data is made available, the questions looming over DraftKings – and all operators – include:

  • Which staff members, and how many, are seeing data like this or have access to it?
  • What other data could these employees access that would be of use in setting lineups?
  • What precautions are being taken to keep the data from leaking?

single logo_smallThe threat of “insider trading”

Even if a DFS site employee is not playing DFS (at his or her site, or elsewhere) this data would be extremely valuable to professional DFS players.

If illicitly released by an employee, you’d be looking at a scenario that is functionally the equivalent of insider trading on the stock market, a point not lost on sports and gaming attorney Daniel Wallach:

With too many employees presumably having access to this inside information, it raises the specter of insiders using this non-public information to gain an edge when they play similar contests for big money on other sites.

At a minimum, DFS employees and insiders should be restricted from playing on any site (not just their own), and access to this type of information should be limited only to the most essential of personnel. If it’s too easily accessible to most employees, the risk and suspicion of insider profiteering will not go away anytime soon.

single logo_smallDo DFS operators have a clear policy on employee play at other DFS sites?

Employees of DFS sites absolutely do play DFS at other sites.

We are not aware of any DFS company that has a blanket policy prohibiting employees from playing on other DFS sites.

Anecdotally, the amount of cross-site play by operator employees is substantial.

One industry insider who wished to remain anonymous told LSR that “a significant number of the whales at the top DFS sites are employees – often executives – of other sites.”

(From a DFS operator’s point of view, a “whale” is simply a high-volume player that generates significant revenue, not necessarily a winning or losing player.)

The policy on the matter at DraftKings appears to be murky to its employees, at least based on the following exchange between a DraftKings developer and Bob Voulgaris on Twitter:

Unless there’s an error in Hester’s reply or some sort of broader context, it appears that, by Hester’s understanding of DraftKings’ internal policy, Haskell should not have been able to bothhave access to the lineup data and play at FanDuel.

single logo_smallWhere the story intersects with the issue of regulation

Daily fantasy sports currently occupies a legal space that allows it to exist outside of the regulatory umbrella that covers conceptually similar products like parimutuel horse wagering, poker, andsportsbetting.

As a result, the industry is functionally self-regulated when it comes to the finer points of operation. The upshot:

  • There are no formal, industry-wide rules governing this particular situation.
  • There is no transparency regarding the nature of the situation.
  • There is no guarantee of accountability.
  • There is no body actively working to craft policy that would prevent future conflictsfrom arising.

As Seth Young, COO of Star Fantasy Leagues, noted to LSR, “brick and mortar groups in a regulated environment have tight controls on who can access what data. We always talk about how we have been built to address things like this, and other concerns of gaming regulators, etc. There’s a reason this stuff doesn’t come out of our camp, and it’s not because of player numbers.”

“This is, however, another case in point why we license and control our technology,” Young added. “Knowing what I know, I’m not sure how this sort of thing happens by accident, or how deep this integrity issue goes.”

Two other key issues deserve additional consideration.

single logo_smallThe need for an impartial source

Right now, the only source for definitive information is DraftKings. So your position on the truth of the situation fundamentally pivots on whether you believe DraftKings or not.

In a regulated environment, a third party, likely the government, would be overseeing issues of game integrity, access to data, and the like.

Should DraftKings — or any other DFS site — be the sole arbiter of the integrity of its own internal systems?

single logo_smallWhat we don’t know in the absence of regulation

In the absence of an external oversight function, here are some critical questions stemming from the data leak issue that we’ll never have certainty regarding:

  • What is the policy sites have regarding employee play at their home site and employee play at other sites?
  • How is the policy enforced?
  • How many instances have their been where the policy was broken? How many accusations or investigations?
  • What was the investigative process for determining whether a policy violation took place?
  • How many people have access to competitively sensitive data?
  • What percentage of employees / executives from one site have active accounts at other sites?
  • When a player hits a big score at a site, does the site investigate him or her for links to employees at the site?

single logo_smallWhen is a self-regulatory body not a self-regulatory body?

The FSTA – the primary trade group for the DFS industry – does have a “Paid Entry Contest Operator Charter” that serves as the only outside oversight for companies in the DFS industry. The charter includes a section dedicated to game integrity:

Player Protection

The signatory company will ensure employees or other persons connected to the company with access to confidential player information (such as line-ups) will not:

  • Play on their own games (apart from for testing purposes or in private leagues)
  • Use confidential player information to gain an advantage playing against players on a different site
  • Share confidential player information (such as win rate) to anyone outside of the company

Note that the FSTA considers lineups to be “confidential player information” and that the leak appears to be a clear violation of the FSTA charter.

But what’s actually behind the policy? The FSTA itself makes it clear that the body isn’t meant to serve as an enforcement apparatus. From the charter:

Conforming with the above should not be viewed as compliance with the law, and the FSTA is in no way certifying such compliance of member companies. Companies should procure and adhere to legal advice regarding their games from skilled, experienced counsel of their choice

The FSTA is not undertaking to audit or regulate member companies. Rather, this code is designed to foster proper behavior and allow the FSTA to exercise discretion and take action if it so chooses should it learn that a member company is not adhering to the principles set forth above.

Also, if you violate the charter, the only penalty would be no longer having membership in the FSTA, which is nowhere near what the penalty would be for an infraction regarding game integrity that would result under regulation.

FSTA board members include the CEOs of DraftKings and FanDuel.

single logo_smallReaction from DraftKings and the Fantasy Sports Trade Association

Update: Both DraftKings and the FSTA offered new statements late Monday night.

DraftKings

DraftKings and FanDuel released what appears to be a joint statement on Monday morning:

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.

An almost identical statement appeared at FanDuel earlier in the morning. It was slightly different, with the phrase “While there has been recent attention on industry employees playing on FanDuel and DraftKings…” appearing in FanDuel’s version.

Prior to that statement on Monday, the only official reaction to this story has come via the RotoGrinders thread, where DraftKings co-founder Matt Kalish told RotoGrinders that a statement would be coming on Monday regarding this incident. More from RG’s Cal Spears:

Kalish told me the statement Monday will detail how this information is currently protected from employees. It will also detail new policies for employess playing on other sites that will make everyone much more comfortable.

Based on Kalish’s comment, it originally appeared that more than this statement would come from DraftKings; whether that is still the case is unknown.

Will Hester, whose Linkedin identifies him as a software developer at DraftKings, has made various comments on the situation via Twitter.

FSTA

The FSTA made a statement late Monday night via its website. Here is the full text:

(Chicago, IL)  – 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.

single logo_smallDid Haskell have early access to data that impacted his win at FanDuel?

RotoGrinders founder Cal Spears reported that Haskell did not have access to the data before setting his lineup at FanDuel. Here is his post from the RG thread, which included an update from Saturday:

There is a narrative running on Twitter that Ethan had access to this data before lineups locked and used it to play on Fanduel. From what I’m told he received the ownership report well after lineups locked on Fanduel. There is plenty of merit in a debate about site employees playing on different sites, but we need to base that debate in reality. Ethan was not using this data to pick his week 3 teams on Fanduel, he was writing about this data for DK Playbook after his week 3 teams on Fanduel had already locked.

Spears said he also confirmed with DraftKings co-founder Matt Kalish that the data that Haskell had access to was issued too late to be of use at FanDuel.