A scandal over the alleged misuse of inside information in the daily fantasy sports industry has now caught the eye of state regulators.

The New York attorney general is opening an inquiry into accusations that DraftKings and FanDuel employees use their access to privileged company data to win big on rival sites — a cheating tactic akin to insider trading on Wall Street.

See also: Fantasy football cheating accusations leave DraftKings and FanDuel embroiled in scandal

Attorney General Eric T. Schneiderman is asking the two companies for details on their internal fraud prevention practices as well as the names and job descriptions of any employees who handle data that could be considered an advantage in playing the game, according to letters the office sent to each company on Tuesday.

The controversy came to a head on Monday when it was reported that DraftKings content manager Ethan Haskell won at least $350,000 on FanDuel after inadvertently leaking player popularity percentages on Twitter. The company countered that Haskell had received the data 40 minutes after the deadline to lock in his roster on FanDuel, citing an internal investigation.

Both companies freely admit that their employees play for money on competing daily fantasy sites, but they maintain that there is no evidence of any evidence of misused data.

"Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs," a joint statement released Monday reads.

Despite the lack of firm evidence, the incident raised questions about the fairness of employees winning jackpots at competing sites, as well as the general lack of regulation in a burgeoning multibillion industry that critics have labelled legalized gambling.

On Tuesday, New York congressional representative Hakeem Jeffries, a Democrat, called on the House Judiciary Committee in Washington to examine "whether permitting a multibillion-dollar industry to police itself serves the best interests of the American people" and New Jersey Democratic Senator Robert Menendez said the Federal Trade Commission should enact more regulation of the industry, according to the New York Times.

Meanwhile, ESPN distanced itself from the companies on Tuesday by cutting all sponsored segments from within its shows, Outside the Lines reported. The channel will continue to air both companies' ads.

The daily fantasy format — in which fans pick players for a single game day and bet for pools of prize money rather than drafting a season-long team among groups of friends — has roped in hundreds of new converts, thanks to advertising blitzes that have made the two brands ubiquitous on football broadcasts and across the Internet.

But research done by Sports Business Daily shows that just 1.3% of players took home about 90% of the winnings in the first half of the fantasy baseball season.

The thin line between illegal and legal gambling which the industry straddles has invited plenty of scrutiny from politicians and regulators in the past.

Update, Wednesday October 7, 10:30 PST: FanDuel said in a statement on Wednesday that it has permanently banned all employees from playing daily fantasy for money on any site. Both companies had already put in place temporary bans on Monday night.

The company said that it has enlisted former U.S. Attorney General Michael Mukasey to look into its internal policies for handling company data and make a list of recommendations for improvement. It's also created an advisory board led by New York lawyer Michael Garcia of law firm Kirkland & Ellis that will guide the company on fair practices.

"It’s our job to ensure that as our company grows, so does our ability to ensure that our fans can be confident in the sanctity and integrity of every game, every day," the company said in the statement.

Update, Wednesday October 7, 11:30 PST: Following FanDuel's lead, DraftKings said in a statement that it has also permanently banned employees from playing on any daily fantasy sites.

It's also asked former U.S. Attorney John Pappalardo, to conduct an internal review and fact-check its internal investigation and signed on his law firm, Greenberg Traurig to advise on an ongoing basis.