As daily fantasy sports sites such as DraftKings and FanDuel face further scrutiny, Nevada gaming officials have put their foot down. The state says that if DFS sites want to operate in the state, then they had better get a gambling license to do so. This follows an initial investigation into alleged insider trading when a DraftKings employee won $350,000 on rival site, FanDuel.
Along with allegations of insider trading — we covered in Part 1 & 2 of our Inside DFS series — DraftKings is now being investigated by the Federal Bureau of Investigation (FBI) and U.S. Justice Department (DOJ), and the investigation is in the preliminary stages, according to The Wall Street Journal.
A DraftKings spokeswoman made the following statement, via The Wall Street Journal report:
“It is entirely predictable that the government would follow up on the misleading reports about our industry. We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.”
The biggest issue is whether or not daily fantasy sports are a game of skill or gambling, which is a game of chance. Sites like DraftKings and FanDuel have been operating under an exemption to the Unlawful Internet Gambling Enforcement Act of 2006, per ESPN.
The Nevada Gaming Control Board issued a notice Thursday saying the sites must stop offering their contests to Nevada residents effective immediately. Operators face felony fines and 10 years in prison, according to ktvn.com.
KTVN also reported that American Gaming Association (AGA) President and CEO Geoff Freeman issued a statement on daily fantasy sports following the NGCB notice.
“The casino gaming industry has repeatedly called for greater legal clarity on daily fantasy sports. We appreciate that the Nevada Gaming Control Board 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.”
If DraftKings and FanDuel — or other DFS sites — think that business will continue as usual, they had better be prepared for the long haul because this subject is not going away anytime soon. Also, with the Nevada Gaming Board making the statement that they have today, expect more states to follow suit, which will bring even more changes to the DFS platform in the future.