Already dealing with the fallout from the DraftKings lineup data leak brouhaha, the DFS industry suffered its biggest legal setback to date on Thursday when the Nevada Gaming Control Board issued a notice that reads in part:
“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.”
The notice goes on to say that all unlicensed DFS sites must shut down immediately, and it cautions licensed gaming companies in the state to “exercise discretion in participating in business associations with DFS operators that have not obtained Nevada gaming approvals.”
One site, Star Fantasy Leagues, has informed LegalSportsReport.com it will be leaving the Nevada market – Star Fantasy Leagues is the most prudent DFS operator when it comes to avoiding questionable states.
According to LegalSportsReport.com’s Chris Grove, DraftKings said it would “get back to me” on whether the company will leave Nevada or not.
Notice several months in the making
The review by the NGCB likely began well before the current controversy regarding the data leak by a DraftKings employee.
As far back as July, Nevada Gaming Control Board Chairman A.G. Burnett told the Las Vegas Review-Journal, “Gaming licensees need to do an analysis on the legal ramifications,” of offering daily fantasy sports.
“They need to understand the legal issues if they step into that arena,” Burnett continued, later adding, “It’s something we may have to look at in terms of it being legal under Nevada gaming law.”
Other states also question legality
Earlier this year, several DFS operators pulled out of the state of Michigan following comments by Rick Kalm, the executive director of the Michigan Gaming Control Board that called DFS, “illegal under current Michigan law.”
In Massachusetts, Attorney General Maura Healey reviewed DFS operator DraftKings and found the company to be in compliance with Massachusetts law. That being said, Healey, Governor Charlie Baker, and Massachusetts Speaker of the House Robert DeLeo have all expressed concerns over the lack of regulation of the burgeoning industry.
In New York, Attorney General Eric Schneiderman called DFS, “totally unregulated gambling venues,” and announced he intended to investigate the industry.
NGCB Statement on DFS
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.