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In Case You Hadn’t Heard…What Happens When Fantasy Sports and Fraud Coverage?

October 12th, 2015 by Keith Hock

As a boy, I loved playing baseball and basketball simulation games. Each turn of the game card was filtered through a player card based on actual statistics to create a hit or an out, a basket or a rebound. I would then compile the stats accumulated by my fictional teams (yes, I was a number-cruncher as a kid, too).

Like most things in life, “fantasy” sports have evolved since my days of card flipping and manual stats compiling. Today, the internet makes managing and tracking fantasy sports teams as easy as clicking a computer mouse. And the evolution has continued with the advent of so-called “daily” or “weekly” fantasy games. Two companies – FanDuel and DraftKings – are the market leaders. Each has raised millions of dollars of funding being used to purchase seemingly endless ads. This week the companies’ largely positive press coverage took a turn for the worse. A DraftKings’ employee won $350,000 playing a FanDuel game, allegedly using “inside information” that he obtained as a DraftKings’ employee.

So what does any of this have to do with forensic accounting? One definition of occupational fraud is, “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” Using this definition, did the Draft Kings’ employee commit an occupational fraud?

Based on the public accounts, he used his occupation (his position at Draft Kings) for personal enrichment (he won $350,000) through the deliberate misuse of the organization’s resources (information about Draft Kings’ fantasy games). New York’s attorney general seems to agree that a fraud may have been committed. And this would not be a victimless crime – the DraftKings’ employee’s win means that another FanDuel player (presumably playing without the benefit of “inside information”) did not win (or at least did not win $350,000).

It is too soon to know whether criminal charges will result from this incident but the first class action lawsuit has already been filed. Both DraftKings and FanDuel have announced that its employees are now banned from participating in fantasy sports games. If nothing else, the companies seem to realize that this “scandal” creates an appearance of impropriety even if a fraud was not committed.

What do you think – was this a fraud? Regardless, should fantasy sports be more closely regulated to protect its players? Please share your answers in the comment box below.

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