CINCINNATI — Daily fantasy-sports sites might be facing a rather harsh reality.
According to a report by the Wall Street Journal, the U.S. Justice Department and the Federal Bureau of Investigation have launched an investigation into the legality of some fantasy-sports operators’ business models.
Specifically, the probe — still in the preliminary stages — is trying to determine if daily fantasy games constitute a form of illegal gambling.
The question lies in whether sites like DraftKings and and FanDuel, Inc. are exempt from a 2006 law that prohibited financial institutions from transferring money to online gambling sites. Fantasy sites have historically operated under exemption from that law.
According to the report, big money flows in and out of the fantasy-sports industry, with investors including media giants such as Comcast Corp. and 21st Century Fox Inc., among others.
The investigation comes hot on the heels of an employee working for popular fantasy site DraftKings admitting on a message board that he had leaked sensitive data about an upcoming contest, a leak DraftKings called an accident and not beneficial to the employee.
A DraftKings spokesman downplayed the investigation, saying in a statement, “It is entirely predictable that the government would follow up on the misleading reports about our industry. We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.”