A federal grand jury has issued a subpoena to the leading trade group for fantasy sports as part of an investigation into the practices and legality of the booming, unregulated daily fantasy sports industry, according to two people involved in the industry.
In 2006, Congress tried to crack down on illegal online sports betting. Today, Internet wagering is thriving, and a new business that resembles gambling, fantasy sports, is winning millions of players and stoking controversy. The Times, with the PBS series “Frontline,” investigated illegal gambling in the Internet age.
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The trade association says it represents 300 members, and its board includes the chief executives of DraftKings, Jason Robins, and FanDuel, Nigel Eccles, as well as executives from investors and participants in the industry such as CBS Sports Digital, Yahoo, Gannett and ESPN.
The daily fantasy sites have quickly grown into a multibillion-dollar business, attracting players who pay an entry fee to the sites, draw up virtual rosters of players and win cash prizes — up to $2 million but typically more than $20 — in contests based on the performance of athletes in real games.
But they have come under scrutiny for the way they handle sensitive data and their aggressive recruitment of players, while some lawmakers and state regulators see their games as a form of gambling that is prohibited by law. The New York attorney general’s office last week announced an inquiry into the sites.
The Illinois Gaming Board said on Friday that it believed the daily fantasy sports sites were illegal and that it would ask the state’s attorney general, Lisa Madigan, for an opinion next week.
On Thursday, Nevada regulators ruled that daily fantasy sports should be considered gambling, not a game of skill, as websites like DraftKings and FanDuel have long claimed, and ordered them to stop operating immediately in the state until the companies and their employees received state gambling licenses.
The F.B.I. began contacting several prominent competitors in the contests, the players said this week, shortly after an employee of DraftKings admitted to releasing sensitive data before a game. The employee, a midlevel content manager, then won $350,000 at a rival site, although DraftKings said he did not have an advantage.
They also said that agents were examining whether the site encouraged and accepted deposits and bets from states where the contests were prohibited.
At least five class-action lawsuits have been filed as well, alleging that fraud has been committed by the two companies as they allowed employees with access to proprietary data to gain an unfair advantage and prey on paying customers. They also allege that some of the industry’s top players employed automated computer programs that targeted weak players as well as high-speed scripts that gave them a substantial edge.
While state and federal lawmakers call for hearings and more stringent regulations, state attorneys general and law enforcement officials are exploring whether daily fantasy sports operations comply with existing laws.
The daily fantasy sites, worth billions of dollars on paper because of a surge of investors, have exploded in popularity and have blanketed broadcasts of football games with advertisements to lure more participants.
Major League Baseball and the N.B.A., networks such as NBC and Fox, and Comcast and the team owners Robert K. Kraft of the New England Patriots and Jerry Jones of the Dallas Cowboys are among the investors in the sites.
The controversy has not focused on so-called seasonal fantasy games, in which players track made-up rosters over a season and usually compete with friends, or not for money.
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