Nevada Gaming Control Board Declares Daily Fantasy Sports Is “Gambling”

The Nevada Gaming Control Board declared on Thursday that daily fantasy sports is a form of gambling. The Control Board announced that companies which accept Nevada players need to be licensed first, or else they will be in violation Nevada state laws.

Control Board Chairman A.G. Burnett said all companies currently operating in Nevada need to cease and desist by Thursday. Those companies are invited to apply for a gaming license, says Burnett, but those which refuse to comply with the state’s rules could face up to 10 years in state prison and felony fines.

A.G. Burnett’s statement said, “We are saying that daily fantasy sports are a gambling game under the statutory definition. We’re also saying that these are sports pools, which is when someone is in the business of accepting wagers on sporting events through any system or method of wagering. We have found that it is a wager, and obviously, it’s on a sporting event, and DFS companies are in the business of accepting those wagers.”

Burnett said that the question of whether DFS is based on skill or chance is immaterial. The key factor is the local gaming laws on the books, which call for regulation of all forms of gaming. Burnett said a game of skill is still illegal, “because in a state like Nevada, our statutes and definitions override that.”

FanDuel’s Statement and Compliance

FanDuel, one of the major daily fantasy sports sites in the country, released a statement on Thursday evening in response to the news. FanDuel’s Director of Communications for FanDuel, Justin Sacco, said his company is “terribly disappointed that the Nevada Gaming Control Board has decided that only incumbent Nevada casinos may offer fantasy sports.”

Sacco’s statement continued with, “This decision stymies innovation and ignores the fact that fantasy sports is a skill-based entertainment product loved and played by millions of sports fans. This decision deprives these fans of a product that has been embraced broadly by the sports community, including professional sports teams, leagues, and media partners.”

FanDuel ended the statement by issuing its compliance with Nevada’s law. It said, “In the interim, because we are committed to ensuring we are compliant in all jurisdictions, regrettably, we are forced to cease operations in Nevada.”

DraftKings’s Statement and Compliance

DraftKings, FanDuel’s major competitor in the DFS market, also said it would comply with Nevada state rules and bar play from Nevada IP addresses. The Boston-based company made a more direct reference to Nevada’s likely reason for banning daily fantasy sports: because Nevada depends so much on the land-based casino gambling industry and wants to protect its sportsbooks from competition.

The DraftKings statement said, “We understand that the gaming industry is important to Nevada and, for that reason, they are taking this exclusionary approach against the increasingly popular fantasy sports industry. We strongly disagree with this decision and will work diligently to ensure Nevadans have the right to participate in what we strongly believe is legal entertainment that millions of Americans enjoy.”

Timing of the Decision

The Gaming Control Board’s actions come at a time when the DFS industry is under fire across the United States. A controversy surrounding a DraftKings employee’s 2nd-place finish in a million-dollar event on FanDuel brought into question the industry’s policies. Many wondered whether DFS contests were fair.

Even before last week’s scandal, the 2015 NFL regular season had brought with it increased scrutiny from state and federal authorities. FanDuel and DraftKings are locked in a year-long competition to become the number one daily fantasy sports websites. Both have collected big investments, allowing them to spend over millions upon millions of dollars on TV, radio, and online advertisements. Those ads have saturated the sports broadcasts over the past couple of months, leading to a backlash in the pop culture.

Impact of Nevada’s Decision

The loss of the Nevada online gaming market is not likely to have a major direct effect. Nevada has the 45th-most populous state, so its community of daily fantasy sports entrants is likely to be the 45th-most important among the United States. Though Nevada has legalized online poker, few of the state’s many gaming companies launched websites and few poker players play on the sites which did.

Nevada’s influence is more indirect. Because it is seen as the center of gambling in the United States, Nevada’s actions could have an effect on the way other states approach daily fantasy sports. At present, five other states either ban or regulate DFS.

American Gaming Association Statement

Geoff Freeman of the American Gaming Association sees the development as good news for the public debate on daily fantasy sports. The AGA released a statement saying, “The casino gaming industry has repeatedly called for greater legal clarity on daily fantasy sports. We appreciate that the Nevada Gaming Control Board has provided that clarity as well as a roadmap for DFS companies and casinos to provide popular fantasy sports within Nevada borders.”

Freeman’s organization added, “We will continue to seek additional clarity in other jurisdictions, as eliminating ambiguity is in the best interests of all parties, including consumers.”

Applying for a Gaming License

Whether companies will choose to apply for a gaming license is a question of uncertainty. FanDuel and DraftKings have insisted their game is not gambling, because it is a game of skill. Also, they have cited the UIGEA, which carved out an exemption for fantasy sports. To apply for a gaming license the same way Caesars Entertainment or MGM Resorts might undermine that argument in other states.

DraftKings applies for a license in the United Kingdom, which indicates DK is likely to apply in Nevada. The Gaming Commission approved the license this week, though some in the UK disapproved of that decision.