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Nevada regulators have banned daily fantasy sites (DFS) including DraftKings and FanDuel, categorizing them as gambling rather than a game of skill. The Nevada Gaming Control Board has ordered the sites to cease operating immediately until they receive their state gambling licenses.
It’s unlikely that any DFS companies will apply for Nevada gambling licenses as its a label they’re desperate to avoid so they can continue to operate in more populous states.
New York-based FanDuel says its members play a game of skill rather than gambling and as a result have been operating under an exemption to the 2006 Unlawful Internet Gambling Enforcement Act, which bans online gambling sites.
FanDuel and other fantasy sites can select individual players from across different teams and then win or lose based on points accumulated for those players performances.
"wagering on collective performance"
The Nevada ruling says that DFS “involves wagering on the collective performance of individuals participating in sporting events”. The ruling makes Nevada the 13th state to ban at least one DFS site and the sixth to ban FanDuel.
Nevada’s three million residents only make up a small proportion of the site’s customers but the ruling could be significant because of the state’s and Las Vegas’ influence in American sports betting.
FanDuel said it's disappointed with the ruling in an official statement saying it “deprives these fans of a product that has been embraced broadly by the sports community including professional sports teams, leagues and media partners.”
Skill-based entertainment
FanDuel was clear to separate its business from gambling practices. “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,” the statement said.
Despite objections FanDuel agreed it would cease operations in Nevada immediately, but promised it would explore all options to legally bring the game back to Nevada.
It is of course in Nevada’s interest to ban these DFS, which can operate across the country over the Internet and threaten to take business away from Las Vegas, which runs the only legal active sports betting in the country.
The ruling is the latest blow in what has been a turbulent week for DraftKings and FanDuel. On Thursday, a report in the Wall Street Journal suggested the FBI and the Justice Department are investigating the legality of DFS business models, and a lawsuits was filed in Louisiana accusing FanDuel and DraftKing employees of using insider knowledge to win money on the other’s platforms.
