Nevada: DFS Sites Need Sports Betting LicensesGaming Control Board Asks DraftKings, FanDuel To Leave |
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The state of Nevada decided Thursday to ban daily fantasy sports sites until they receive licenses to operate sports wagering within the state’s borders. The Nevada Gaming Control Board ruled that the single-day fantasy sports contests are gambling under state law, even though the DFS industry has a carve-out under federal law pertaining to online betting.
Nevada is the only state in the country with sports books. In 2014, gamblers in Nevada bet an all-time high of $3.9 billion on sports, an increase of 7.7 percent over 2013.
The two largest DFS sites, New York-based FanDuel and Boston-based DraftKings, said Friday that they will abide by the decision of the Nevada Gaming Control Board. In order to resume offering products to those within Nevada, the sites must obtain a sports pool gaming license. Nevada has some of the most robust gaming regulations in the world, and it’s unclear if the DFS sites will pursue licenses. The licensing process in Nevada varies greatly based on the company and what kind of business activity is involved, but receiving approval is typically a long and complex undertaking.
Nevada’s move comes less than three weeks after DraftKings CEO Jason Robbins was in Las Vegas to compare his product to skill-based games like chess and to try to make a clear distinction between DFS and sports betting. It apparently wasn’t convincing enough.
Nevada Gaming Control Board Chairman A.G. Burnett wrote in the notice dated Oct. 15:
“Since offering DFS in Nevada is illegal without the appropriate license, all unlicensed activities must cease and desist from the date of this notice until such time as either the Nevada Revised Statutes are changed or until such entities file for and obtain the requisite licenses to engage in said activity. Although Nevada gaming licensees who have received approval to operate a sports pool may expose DFS for play themselves in Nevada (in compliance with all applicable statutes and regulations), such licensees should exercise discretion in participating in business associations with DFS operators that have not obtained Nevada gaming approvals.”
DraftKings issued a statement that said it “strongly disagree[s] with this decision,” while FanDuel said it is “terribly disappointed” with Nevada’s position, according to a report from the Las Vegas Review-Journal. Those two startups control 90 percent of the DFS market and have drawn investors such as Google, Comcast, Disney and the major professional sports leagues. The leagues are against the spread of traditional sports betting in a state-by-state patchwork, but they have fully endorsed DFS.
Yahoo! and PokerStars’ parent company Amaya Gaming Group are also making plays at market share. It’s unclear who the third largest DFS operator is at the moment.
Nevada is the sixth state to ban DFS sites. Arizona, Louisiana, Iowa, Montana and Washington State are the other jurisdictions where the businesses don’t offer their respective products. Washington has a hearing on fantasy sports planned for December.
DraftKings sent its Nevada customers an email on Friday asking them to withdraw their funds. “Your funds are safe, and have always been safe as we keep them in a segregated player account which is never comingled with our operating funds,” the email said.
The decision in Nevada is in contrast to the recent one in Massachusetts, the home state of DraftKings. That state’s attorney general said that DFS is not against the law. Florida and Michigan are also in the process of similar reviews of the DFS industry.
According to Eilers Research, daily fantasy games will generate around $2.6 billion in entry fees this year and grow by 41 percent annually. The market could reach $14.4 billion in 2020. Those estimates were before Nevada decided to ban the sites, but the Silver State is a tiny market for the DFS industry. DraftKings said it has “thousands of customers” in Nevada.
The state of New York made headlines earlier this month when it announced that it was beginning an inquiry into DFS after reports of employees at DFS companies winning big paydays thanks to having access to insider information. The DFS industry responded by banning its employees from playing the games, even on rival sites.
Some lawmakers on Capitol Hill have called for a look into the booming fantasy sports industry, which has overlap with discussions around federal sports betting legislation. The American Gaming Association, the commercial casino industry’s top lobbying group, has been advocating for sports betting reform this year, as the state of New Jersey continues to challenge an early 1990s law that limited sports betting to just a handful of states that were grandfathered in before the ban. Delaware is the only other state besides Nevada with betting on sports.
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