October 7, 2015 / 6:34 PM / in 2 years

Fantasy sports companies ban employees from gaming

Nigel Eccles, CEO & Co-founder of FanDuel, speaks during an interview in New York, September 10, 2015.Brendan McDermid

WASHINGTON (Reuters) - Fantasy sports companies FanDuel Inc and DraftKings said on Wednesday that they had banned their employees from all daily fantasy games and also barred staff from rival companies from their sites.

The fantasy sports industry has faced a firestorm of criticism since news broke that an employee at DraftKings won $350,000 from a $25 entry in an American football contest on the rival FanDuel site using what reports said appeared to be inside information.

The companies have said there is no evidence the employee, who won the $350,000, did anything wrong.

That said, both companies said they were hiring outside legal experts to look at the circumstances of the DraftKings' employee's win, and to evaluate how the games are run overall.

FanDuel also said it had asked former U.S. Attorney General Michael Mukasey to evaluate its internal controls while DraftKings said it had hired a team led by former U.S. attorney John Pappalardo.

New York Attorney General Eric Schneiderman sent letters to DraftKings and FanDuel saying the allegations raised legal questions about the fairness of the companies and asking for details on how data is secured and who had access to it, according to copies of the letters provided by his office.

Daily fantasy sports, which have developed in recent years, allow participants to draft teams in games played in just one day. It has allowed fans to bet with a frequency that some critics argue is akin to sports betting or gambling.

FanDuel and DraftKings are privately owned and both valued at more than $1 billion.

Investors in DraftKings include Fox Sports, the National Hockey League, Major League Soccer, The Madison Square Garden Company, The Kraft Group, which owns the New England Patriots football team, and Legends Hospitality, a venture owned by baseball's New York Yankees and the NFL's Dallas Cowboys.

FanDuel's investors include Google Capital and Time Warner Investments, Shamrock Capital, NBC Sports Ventures and Comcast Ventures.

Reporting by Diane Bartz; Editing by Bill Trott and Alan Crosby

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