(Reuters) - The trade association of the U.S. fantasy sports industry said Tuesday it has created a control board to oversee the fast-growing, multi-billion industry and avoid outside regulation as it faces scrutiny following a recent scandal.
The Fantasy Sports Trade Association named Seth Harris, who was acting U.S. secretary of labor in the Obama administration, to run the board.
Harris said the board will help ensure that daily fantasy sports games are run honestly through new controls such as a regular auditing process to keep tabs on whether companies are complying with the rules.
"The hope is, by doing that, regulation from outside won't be necessary, that we'll have actual compliance within the industry and no violations that will attract attention from others," he said.
The fantasy sports industry, in which fans pay to compete for daily cash prizes in simulated athletic contests, has come under intense scrutiny at the state and federal level following reports that an employee of one company, DraftKings Inc, won $350,000 from a $25 entry in a contest run by rival FanDuel, using what reports said appeared to be insider information.
According to media reports, the Justice Department and the Federal Bureau of Investigation are investigating the industry. New York's attorney general has also opened a probe, and U.S. Senate Democratic Leader Harry Reid of Nevada has called on Congress to examine fantasy sports services.
The control board plans to have a draft version of standards and rules for the industry to follow in the next three to six months, according to Harris.
In response to the recent scrutiny, companies have been taking on external advisers and law firms, tightening policies and ordering their own investigations.
Harris said the new board will also play a role in enforcing rules, but he said "the goal of the project is to prevent and preempt violation rather than to punish."
Harris said the group will meet with state regulators and federal lawmakers and other stakeholders to find out their concerns.
Both FanDuel and DraftKings, which are privately owned and valued at more than $1 billion, said in separate statements that they look forward to working with the new board.
Reporting by Steve Ginsburg in Washington and Liana B. Baker in New York; Editing by Eric Walsh and Leslie Adler