New York State Attorney General Eric T. Schneiderman has launched a formal inquiry into the daily fantasy sports (DFS) industry in the wake of the insider trading. It’s the first, but not likely the last, piece of fall out from the scandal involving DFS employees winning big bucks on rival DFS sites.

The Attorney General launched the inquiry with a letter to the CEO’s of DraftKings and Fan Duel requesting information about how the companies compile and store data, in addition to questions about who has access to this information.

Not surprisingly, the AG’s letter focuses specifically on the player lineup data that’s at the heart of the scandal that’s threatening to bring major changes to the DFS world.

In response to the scandal, which involved a leaked player lineup percentage chart and a $350,000 Fan Duel tournament win by a DraftKings content manager, DraftKings and Fan Duel have both temporarily banned their employees from playing on rival sites.

But the AG’s letter was not the only bad news that hit the daily fantasy sports biggies as a result of the scandal.

ESPN announced that it will be scaling back DFS content on its properties, though it will continue to accept advertising from them. Given the amount of coverage DFS receives on ESPN sports talk shows like Mike and Mike and The Dan Patrick Show, this is a very big deal.

Executives at DraftKings and Fan Duel have denied any wrongdoing in the matter. It’s worth noting that the DraftKings employee who touched off the scandal, Eric Haskell has not been charged with any crime connected to the scandal.

For daily fantasy sports industry watchers, the fallout surrounding the insider trading scandal isn’t particularly surprising. Politicians and regulators have been itching for an opportunity to put DFS under the regulatory microscope and now they’ve got it.

Both DraftKings and Fan Duel representatives have said the companies will be cooperating with Attorney General Schneiderman’s investigation.

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