Tonight, you could drive through the desert shouting "Vegas, baby!" in a nifty silk suit, you could eat at the free buffet, and gamble away all your money on any pro sports game you want. But you can no longer head upstairs to set your daily fantasy football lineup from the comfort of a comped suite.
That's because daily fantasy sports (DFS) has been classified as gambling, straight up, by the Nevada Gaming Commission (NGC). The ruling makes playing DFS illegal throughout the state until the operators of sites like DraftKings and FanDuel apply for and receive a license. Which might not be difficult, but could effectively cripple the entire DFS industry.
For the last few months, the NGC has conducted an analysis into the legality of pay-to-play DFS, and it concluded that, at it's core, it's no different than other forms of gambling "because DFS involves wagering on the collective performance of individuals participating in sporting events," according to NGC Chairman A.G. Burnett. While the sites argue that fantasy sports is a game of skill, rather than a game of chance, placing bets on the random performances of pro athletes is now equal to picking a number and spinning a roulette wheel.
It doesn't seem like a big problem on the surface, but applying for a Nevada license would be seen as a public admittance that DraftKings, FanDuel, and the like are indeed gambling sites, not the "skill-based entertainment" they purport to be, which would limit the legality of the DFS platform. And the amount of money the sites stand to make in Vegas and Reno under the gambling banner pales to what they can make in the 45 states that still allow some form of it under current gaming laws. It also puts sports leagues opposed to old-school gambling, like the NFL, in a sticky spot because of sponsorships and partnerships with DFS sites.
The Nevada commission's decision falls in line with the feeling among major casino operators, which are losing millions to the popular sites. With DFS revenues on par to match the casino industry's take in the near future, commercial casino operators are among the biggest opponents. Jim Murren, CEO of MGM Resorts International, said anyone who doesn't believe DFS is a form of gambling is "absolutely, utterly wrong."
But the sites aren't in any mood to budge: "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," Justine Sacco, director of communications for FanDuel, retorted 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."
The Gaming Board's analysis backs that up Murren's position, and other states could follow with their own laws restricting DFS play. Similar to the state-by-state legalization of recreational marijuana use, online casino gambling is also legal on a state-by-state basis. While it's available in New Jersey as of 2013, you can't take your laptop across the Ben Franklin Bridge and play online in Pennsylvania. You can't even access casino websites in states where online gaming isn't permitted.
DFS operators have been hit with a wave of negative press recently, including allegations of fraud and insider trading that suggest employees of DFS sites are using proprietary data to make money on a competitor's site. Four lawsuits were filed in federal courts in New York, Illinois, and Louisiana, and there's another class action lawsuit in Florida arguing that players are using bots and algorithms to submit the same lineup dozens of times to scam money from less sophisticated users. Florida sports lawyer Daniel Wallach has been tweeting about the case and has said that the high-priced lawyers involved would not be wasting their time on a suit that isn't serious.
The move by Nevada is the first major step toward initiating some kind of oversight over their operations. To this point, all oversight had been in-house and the two sites had essentially governed themselves. There are no protections in place for those who play and the Nevada decision could pave the way to those safeguards being developed.
Does this mean DFS is over? No. Well, not yet. It just means that the empire that DraftKings and FanDuel were building is a little weaker today as the government and deep-pocketed lobbyists try to figure out how to regulate an industry they don't yet understand.
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