Nevada GCB Commish Rules DFS is Gambling, Operators Must Exit Market Unless Licensed
The hits just keeping coming for the daily fantasy sports (DFS) industry. On Thursday, Nevada Gaming Control Board (GCB) Chairman A. G. Burnett issued an official notice to “All Licensees and Interested Parties” that it is no longer permissible to offer DFS contests to players in Nevada without a specific DFS license.
DFS has been getting piled on during the last couple weeks, getting blasted in the media and seeing investigations launched left and right, but despite the timing, this is not a case of piling on. Burnett began a legal analysis of DFS back in July, so it was only a matter of time before he announced his conclusion.
In the one-page notice, Burnett said that the Gaming Control board concluded that DFS was, in fact, gambling. And “because DFS involves wagering on the collective performance of individuals participating in sporting events,” those who want to offer such contests to people in Nevada must have a valid sports pool operating license.
Thus, DFS sites such as DraftKings and FanDuel must stop letting Nevadans play immediately. Burnett said they will be allowed to start back up again if the law changes or if they obtain a license. Anyone who currently has the appropriate license is permitted to offer DFS, but as Burnett wrote that they, “….should exercise discretion in participating in business associations with DFS operators that have not obtained Nevada gaming approvals.”
Seeing as no Nevada casinos have their own DFS sites (and presumably don’t have any software developed, though that presumption could be wrong), one would think it highly unlikely that anyone would launch a new site anytime soon just so they could grab some of the small Nevada market. Additionally, with all the legal questioning on the federal level right now (not to mention other states such as New York and Massachusetts), it is probably considered way too risky to jump into DFS. Better to wait until the dust settles to make any moves.
This week, the U.S. Department of Justice and Federal Bureau of Investigation started their own investigation into the legality of DFS on the federal level. The probe is in its infancy at the moment – FBI agents out of the Boston office have begun asking DraftKings customers about their experiences with the site.
Though any reasonable person would consider DFS gambling with a skill component, DFS sites are able to operate because of a carve-out in the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) which said that fantasy sports were legal as long as (in a nutshell) the results were not based on the performance of actual real-life teams and prizes were known ahead of time and not based on the number of players or entry fees. Lawmakers and lobbyists at the time, though, did not envision daily fantasy sports as they exist now, but rather traditional, season-long fantasy sports. They had no idea it would become the craze that it is today.
UPDATE: Eric Hollreiser, Vice President of Corporate Communications for Amaya, Inc., issued a brief statement Thursday night regarding Amaya’s DFS entry, StarsDraft, saying, “As a proponent of state regulation of daily fantasy sports, we respect the decision of the Nevada Gaming Control Board and no longer allow Nevada consumers to play for real money on StarsDraft.”
Below is the complete notice from Nevada Gaming Control Board Commission A.G. Burnett:
Over the last several months, Nevada Gaming Control Board (Board) staff has analyzed the legality of pay-to-play daily fantasy sports (DFS) pursuant to the Nevada Gaming Control Act and the regulations adopted thereunder. I further asked the Gaming Division of the Office of the Nevada Attorney General to perform a legal analysis as to whether DFS activities conflict in any way with Nevada law. Based on these analyses, I, along with Board staff, have concluded that DFS constitutes gambling under Nevada law. More specifically, DFS meets the definition of a game or gambling game pursuant to Chapter 463 of the Nevada Revised Statutes. Moreover, because 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. Further, a licensed operator who offers DFS must comply with all laws and regulations that apply to licensed sports pools.
Therefore, 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. 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.