Business model of daily fantasy sports under federal probe: WSJ

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FBI Investigating Fantasy Sports Sites


The U.S. Justice Department and the Federal Bureau of Investigation are looking into the business model of daily fantasy sports operators and trying to determine whether they violate federal laws, the Wall Street Journal reported, citing people familiar with the matter.

Customers of DraftKings Inc have been approached by FBI agents from the Boston office, asking them about their experiences with the company, the WSJ said, citing a person familiar with the matter.

The probe is at a preliminary stage and no decision has been reached. The Justice Department is trying to ascertain if daily fantasy games are a form of gambling that are outside the purview of the exemption, the newspaper reported.

A spokeswoman for DraftKings told the WSJ that they have no knowledge of the specifics of any federal investigation but added that they strongly disagree with any notion that the company has engaged in any illegal activities.

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.

Representatives at the Justice Department, FBI, DraftKings, and FanDuel were not immediately available for comment outside regular U.S business hours.

See photos of the fantasy sports companies and their operations:

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DraftKings/FanDuel fantasy sports investigation
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Business model of daily fantasy sports under federal probe: WSJ
The DraftKings Inc. app is arranged for a photograph on an Apple Inc. iPhone in Washington, D.C., U.S., on Sunday, Oct. 4, 2015. Fantasy sports companies DraftKings Inc. and FanDuel Inc. raised a total of $575 million in July from investors including KKR & Co., 21st Century Fox Inc. and Major League Baseball to attract players to games that pay out millions of dollars in cash prizes in daily contests. Photographer: Andrew Harrer/Bloomberg via Getty Images
The DraftKings Inc. website is arranged for a photograph on an Apple Inc. iPad in Washington, D.C., U.S., on Sunday, Oct. 4, 2015. Fantasy sports companies DraftKings Inc. and FanDuel Inc. raised a total of $575 million in July from investors including KKR & Co., 21st Century Fox Inc. and Major League Baseball to attract players to games that pay out millions of dollars in cash prizes in daily contests. Photographer: Zia Morales/Bloomberg via Getty Images
The FanDuel Inc. app and DraftKings Inc. website are arranged for a photograph in Washington, D.C., U.S., on Monday, Oct. 5, 2015. Fantasy sports companies DraftKings Inc. and FanDuel Inc. raised a total of $575 million in July from investors including KKR & Co., 21st Century Fox Inc. and Major League Baseball to attract players to games that pay out millions of dollars in cash prizes in daily contests. Photographer: Andrew Harrer/Bloomberg via Getty Images
The DraftKings Inc. logo is arranged for a photograph on an Apple Inc. iPhone in Washington, D.C., U.S., on Sunday, Oct. 4, 2015. Fantasy sports companies DraftKings Inc. and FanDuel Inc. raised a total of $575 million in July from investors including KKR & Co., 21st Century Fox Inc. and Major League Baseball to attract players to games that pay out millions of dollars in cash prizes in daily contests. Photographer: Andrew Harrer/Bloomberg via Getty Images
The FanDuel Inc. and DraftKings Inc. apps are displayed on an Apple Inc. iPhone in Washington, D.C., U.S., on Sunday, Oct. 4, 2015. Fantasy sports companies DraftKings Inc. and FanDuel Inc. raised a total of $575 million in July from investors including KKR & Co., 21st Century Fox Inc. and Major League Baseball to attract players to games that pay out millions of dollars in cash prizes in daily contests. Photographer: Andrew Harrer/Bloomberg via Getty Images
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Fantasy sports companies FanDuel Inc and DraftKings said last week that they had banned their employees from all daily fantasy games and also barred staff from rival companies from their sites.

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.

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