MLB seeks explanation from DraftKings after disclosure about employee winnings

(Reuters) - Major League Baseball said on Tuesday it was surprised to learn that fantasy sports operator DraftKings, in which it has an equity investment, allowed its employees to participate in contests and has reached out to the company to discuss the matter.

A DraftKings employee recently won $350,000 from a $25 entry fee in an American football contest and had other major winnings on rival website FanDuel, the companies confirmed on Monday.

That has led to a fire storm of criticism from many with connections to the nascent business as employees are seen potentially having an edge because they may be able to see how some of the best-performing participants are behaving before that becomes public information.

Daily fantasy sports, which have only been developed in the past few years, allow players to draft teams in games played in as little as one day. This has allowed fans to bet with a frequency that some critics argue is akin to sports betting or gambling and led to the rise of the two privately-owned industry leaders, FanDuel and DraftKings, both valued at more than $1 billion. Most popular games they offer are American football and baseball.

Major League Baseball (MLB), which is the major professional baseball league in North America, has invested twice in DraftKings, in 2013 and 2015, though it declines to say how large a stake it has acquired.

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DraftKings has a multi-year exclusive marketing partnership with MLB that offers co-branded fantasy games and “fan experiences.”

MLB spokesman Matt Bourne said in a statement that it prohibits its own players and employees from participating in fantasy baseball games where money or something of value is at stake, and did not know that the situation was different at DraftKings. “We have reached out and discussed this matter with them,” he said.

DraftKings and FanDuel have temporarily banned players from playing daily fantasy sports until they come up with a more detailed policy on the issue, the companies said in a joint statement Monday. DraftKings did not respond to a request for comment on MLB’s statement.

The Fantasy Sports Trade Association, the trade group representing the two companies and others in the industry, has a rule that member companies must restrict employee access to competitive data for play on other sites, it said on Monday.

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The National Basketball Association, which is an investor in FanDuel, said it was monitoring the reports about the use of data in daily fantasy sports.

NBA spokesman Mike Bass said the league was “advised that all appropriate actions are being taken to maintain the highest level of integrity for fantasy players.”

The NBA does not allow its players or employees to participate in NBA fantasy leagues for cash or other things of value.

Other investors in DraftKings, such as Major League Soccer, and the National Hockey League declined to comment.

Reporting by Liana B. Baker and Steve Ginsburg; Editing by Martin Howell