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DraftKings, FanDuel Permanently Ban Employees From Playing Daily Fantasy

The moves follow a scandal that brought public and congressional scrutiny to the industry.

The two largest daily fantasy sports websites permanently banned their employees Wednesday from participating in fantasy contests for money, two days after a scandal erupted within the industry

The two sites, DraftKings and FanDuel, instituted temporary bans on Tuesday. They had already prohibited employees from participating in daily fantasy contests on their own sites, but the new bans will stretch to competitor sites as well.

The sites are responding to revelations that over the weekend, a DraftKings employee inadvertently released information related to the use of NFL players in daily fantasy lineups. The same employee won $350,000 in a contest on FanDuel, and though DraftKings insisted he had not used the information improperly, the leak raised concerns about the sites' internal controls over data, access to insider information, and consumer protections within the industry.

"As a leader in the Daily Fantasy Sports industry, we take the trust of our community very seriously and remain fiercely committed to the integrity of DraftKings’ Daily Fantasy Sports product," DraftKings said in a statement.

The company also announced that it had retained the legal services of New York-based Greenberg Traurig, and that the law firm and a team led by former U.S. Attorney John Pappalardo would conduct an "investigation into the specific allegations" related to the scandal. It said it plans to release the findings once the review is complete.

Alongside its ban, FanDuel has asked former U.S. Attorney General Michael Mukasey to conduct a review of its internal practices, the company said in a release. FanDuel will also ask Mukasey for recommendations about how to strengthen its internal controls and processes and set up an advisory board.

"It’s our job to ensure that as our company grows, so does our ability to ensure that our fans can be confident in the sanctity and integrity of every game, every day," FanDuel's release said.

The moves to boost transparency and security come as federal lawmakers and state authorities have shown an increasing interest in the daily fantasy industry. Multiple members of Congress, including Senate Minority Leader Harry Reid (D-Nev.), said Tuesday that lawmakers should examine the industry in the wake of the scandal, and the House Energy and Commerce Committee is expected to hold a hearing about daily fantasy in the months ahead.

New York Attorney General Eric Schneiderman launched his own investigation into the companies Tuesday, adding to the list of state attorneys general and gaming commissions that are weighing issues around daily fantasy's legality. 

The moves are unlikely to put a total end to calls to step up oversight of daily fantasy, which may be "an industry growing faster than its ability to self-police,” Chris Grove, the editor of legalsportsreport.com, told The Huffington Post on Tuesday. Grove was among the first to break news of the scandal.

But the effort could help boost perceptions of the two companies in the eyes of its growing base of users and its business partners, including Major League Baseball and ESPN, both of which expressed concern (and in ESPN's case, removed some promotions) over the issue. And it could be a positive first step for the daily fantasy sites in response to the scandal.

"The industry needs to figure out what their best practices are," UCLA law professor Stephen Bainbridge told HuffPost Tuesday. "Or somebody's going to come along and make them do it." 

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