With the higher profile of unregulated fantasy sports betting comes more scrutiny from the public and more concerns from law enforcement about how these businesses might be running afoul of the law. Days after it was confirmed that a DraftKings employee had made $350,000 in one weekend gambling on competing site FanDuel, the attorney general for the state of New York has opened an inquiry into this growing industry.

Yesterday, New York AG Eric Schneiderman sent letters to the heads of DraftKings [PDF] and FanDuel [PDF], noting that the employee’s actions and the companies’ subsequent responses “raise legal questions relating to the fairness, transparency, and security” of their operations and the “reliability of representations your company has made to customers.”

The ongoing scandal at these sites involves a mid-level employee at DraftKings who, shortly before kickoff for Week 3 of the NFL season, Tweeted out a list showing ownership levels of players in the site’s weekly Millionaire Maker contest.

This information, which shows how many people in the contest have put a certain NFL player on their fantasy team, could be incredibly important for someone looking for an edge over the thousands of other players involved in the contest, and it’s usually kept quiet until after the NFL games have started and fantasy lineups have been locked in.

After it got out that this same employee had, that same weekend, earned $350,000 in FanDuel’s NFL Sunday Million competition, people began to accuse him of using his access to this data to gain an unfair advantage.

Both companies have denied that the employee misused the information and now have policies barring staffers from gambling on the others’ site.

In response to this situation, Schneiderman is asking both sites to identify employees who may have access to important statistical information regarding its contests. The letters also seek info on how and for how long this sort of data is stored, along with explanations on how and when employees can use this info.

The companies have until Oct. 15 to reply.

Speaking to NPR yesterday, Schneiderman said that “Fraud is fraud. And, consumers of any product…whether you want to buy a car, participate in fantasy football, our laws are very strong in New York and other states that you can’t commit fraud.”

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