A few short weeks ago, daily fantasy sports sites seemed poised to have their biggest year yet. The two biggest companies in the burgeoning industry – DraftKings and FanDuel – spent a combined $31 million on 9,000 national television commercials for this year’s National Football League season, and fans flocked to the daily sites in droves.
Now, though, DraftKings and FanDuel have drawn the ire of several regulatory agencies, not least of all the Nevada Gaming Control Board.
In a Thursday (Oct. 15) statement, the NGCB issued demands for both daily fantasy sports sites to cease all operations within the state of Nevada. In a move that aligns DFS with the traditional concept of gambling, the NGCB stated that DraftKings and FanDuel would have to apply for and be issued the same licenses that casinos are regulated under.
“We are saying that DFS are a gambling game under the statutory definition,” A.G. Burnett, chairman of the NGCB, told ESPN. “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.”
The NGCB’s decision comes on the heels of reported investigations by both the Federal Bureau of Investigation and the Justice Department, The New York Times reported. Despite the recent negative attention, both DraftKings and FanDuel published statements affirming their decisions to continue operating outside of the state while working toward a resolution with Nevada regulators.
"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,” FanDuel said in a statement. “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. We are examining all options and will exhaust all efforts to bring the fun, challenge and excitement of fantasy sports back to our Nevada fans."
Regardless of how the NGCB decides to move forward with its decision, Fortune explained that the move to reclassify DFS sites as gambling operations could kick off debates in other states as well. DraftKings and FanDuel are both live in 44 states across the country, though there is no agreed-upon definition for what constitutes a gambling site.
The issue might hinge on the degree to which states decide DFS competitions incorporate an individual player’s skills – his or her knowledge of the players that afford the greatest chance to win. For example, Fortune noted that Kansas currently has a flexible standard that requires companies to prove that their games incorporate at least more skill than chance. However, in states like Tennessee and Arkansas, any degree of chance delineates gambling.
In a statement, the American Gaming Association called for just that sort of clarification.
"The casino gaming industry has repeatedly called for greater legal clarity on daily fantasy sports,” the AGA wrote. “We appreciate that the NGCB has provided that clarity as well as a roadmap for DFS companies and casinos to provide popular fantasy sports within Nevada borders. We will continue to seek additional clarity in other jurisdictions, as eliminating ambiguity is in the best interests of all parties, including consumers."
While regulators and DFS sites butt heads over their ultimate legality, it’s unclear if users outside of Nevada will be affected by all the negative press. However, if more agencies decide to take the NCGB’s hard-line stance, DraftKings and FanDuel might need to throw up a Hail Mary to escape a gambling reclassification.