Nevada's Gaming Control Board announced that fantasy sports will be regulated like other forms of gambling, and ordered operators to halt operation in the state unless and until they obtain gambling licenses.
The industry has been making headlines since it was revealed that employees at two of the major fantasy sites—FanDuel and DraftKings—regularly played on the other site, in some cases winning significant amounts of money. Allegations of insider information prompted letters from lawmakers, class action lawsuits, and multiple government investigations, including by the Federal Bureau of Investigation and the New York Attorney General's office.
The Unlawful Internet Gambling Enforcement Act of 2006 outlawed online poker and sports gambling but permitted an exception for fantasy sports, declaring them a game of skill, except in states where they were deemed illegal—Arizona, Iowa, Louisiana, Montana and Washington. Nevada has now been added to that list.
In a notice to these sites, the Nevada Gaming Control Board announced that "pay-to-play daily fantasy sports," or DFS, are a form of gambling under state law requiring a license issued by the Nevada Gaming Commission and ordered operations to cease and desist until a license is obtained. The notice added that "While this Industry Notice is intended to provide clear guidance as to Nevada law, Nevada licensees wishing to conduct business with DFS companies should also conduct thorough and objective reviews of DFS activities under the laws of other states and any applicable federal laws."
In support of its decision, the Board also released a memorandum from the state's Attorney General office on the legality of DFS in Nevada. "[B]ecause DFS involves wagering on the collective performance of individuals participating in sporting events, under current law, regulation and approvals, in order to lawfully expose DFS for play within the state of Nevada, a person must possess a license to operate a sports pool issued by the Nevada Gaming Commission," according to the notice.
Both FanDuel and DraftKings—neither of which are currently licensed—criticized the announcement. Noting that the company is "examining all options," FanDuel said the decision "deprives these fans of a product that has been embraced broadly by the sports community, including professional sports teams, leagues and media partners." DraftKings similarly emphasized the popularity of fantasy sports. "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."
To read the Nevada Gaming Control Board's notice to industry, click here.
To read the Nevada Attorney General's memorandum on the legality of DFS, click here.
Why it matters: With Nevada joining the states where fantasy leagues are deemed games of chance, operators are continuing to feel the consequences of the recent scandal. Now the question becomes: will other states follow suit?