The FBI and U.S. Justice Department have initiated an investigation into the two leading Daily Fantasy Sports companies, DraftKings and FanDuel.
The concern lies with whether Daily Fantasy Sports is actually a form of illegal sports betting, an activity forbidden under the federal Wire Act.
From the Wall Street Journal:
The probe is in the preliminary stage, two people said. It is part of an ongoing discussion within the Justice Department about the legality of daily fantasy sites, in which customers pay entry fees to draft virtual sports teams that compete against each other for prize money based on the real-world performances of athletes. Congress in 2006 prohibited financial companies from transferring money to online gambling sites and several were shut down. But so-called games of skill were exempted. Fantasy-sports sites have since operated under that exemption. So-called daily fantasy sites like DraftKings and FanDuel, Inc. didn’t become popular until after the law was enacted.
The Justice Department is trying to determine whether daily fantasy games are a form of gambling that falls outside the purview of the exemption. No decision on the matter has been reached, these people said.
Following a scandal involving alleged “insider trading”, the two companies have come under fire in recent weeks. Three state Attorney Generals have launched their own probes into the two companies.
– Aaron Goldstein, Gambling911.com