We have recently learned of negative public comments aired by members of Nevada’s commercial casino industry directed at the traditional daily fantasy paradigm. Nevada’s gaming regulators have seemingly responded to the powerful casino industry’s complaints by indicating that the State may take a hard look at the legality of fantasy sports under State gambling law.
The public manifestations of this brewing conflict seemingly stem from tensions caused by the daily fantasy sports (“DFS”) industry’s lobbying efforts to ensure that DFS is classified as a non-gambling product by regulators and law enforcement officials, and the perception that daily fantasy sports is actually a form of gambling. Commercial casinos are subject to heavy regulation in Nevada, while DFS, and the websites that operate them, continue to increase both in terms of popularity and financial clout, and represent one of the fastest-growing aspects of the sports business. By some estimates, FanDuel alone pays out in excess of $10 million in prizes each week. It seems almost inevitable that the commercial gaming industry would eventually start to see the daily fantasy sports industry as a threat to its bottom line. And now the top State agency tasked with regulating these casinos has taken notice of their increasingly loud complaints.
Potential Ramifications for the Legality of Daily Fantasy Sports
We have written extensively about how the fantasy sports industry has been able to take advantage of the favored status offered by the Unlawful Internet Gambling Enforcement Act’s (“UIGEA”) narrowly tailored fantasy sports exemption. However, while protected at the federal level, the legality of fantasy sports contests is ultimately determined on a state by state basis by state gambling laws. To date, most states’ laws do not directly address the legality of fantasy sports contests, allowing them to operate relatively unrestricted at the state level. However, the Nevada State Gaming Control Board’s indication that it may look closer at the legal implications of daily fantasy sports contests may ultimately prove crucial as the debate over the legality of fantasy sports continues to rage at the state level. Should Nevada ultimately determine that fantasy sports are a game of chance, rather than a game of skill, it could have wide ranging consequences for the entire industry. As this public debate plays out, it will be fascinating for casual observers and gaming attorneys alike to monitor how Nevada responds.