DraftKings & FanDuel: It Was Only A Matter Of Time Before Nevada DFS Shutdown
You had to see this coming, you just had to. After the news broke last week about a DraftKings employee using “inside information” to win $350,000 at rival FanDuel, it seemed that the walls were going to start closing in on Daily Fantasy Sports. Well, it has, and in a big way.
DraftKings and FanDuel have had the legality of their business model under reported scrutiny by the Federal Bureau of Investigation and many state legislatures. Both sites are also now facing a tough time in the court of sports fan opinion – and calls for regulation and taxation by a top Massachusetts lawmaker.
However, people began to wonder if this were a blip on the DFS screen. Just this past weekend alone was the most successful ever for both sites. They received a combined 7.1 million entries to their guaranteed prize pool tournaments, generating a whopping $43.6 million in entry fees. Even after advertising being pulled from some major sports sites (i.e., DraftKings ads being pulled from ESPN), the companies have blitzed the airwaves with more than $100 million each on TV ads since the start of the 2015 National Football League season. By doing so, this instantaneously made them two of the top television advertisers in the United States.
Then it happened…..and again, you knew that something like this would happen. On Thursday, Nevada’s Gaming Control Board issued a notice saying the sites must stop offering their contests to residents in the state effective immediately, as they ruled that met their definition of gambling.
Failure to get licensing could result in heavy fines and up to 10 years in prison for those involved. And because you need a license to be a gambling operator in Nevada (which DraftKings and FanDuel don’t have), the services are illegal there.
And it’s more than just any actual crime that may have been committed that will ramp up investigations into FanDuel and DraftKings. Five states have prohibited them from operating, but none is as powerful and influential as Nevada, which has always been a bastion of legal gambling, has strict regulation and has the nation’s only active sports betting.
Letters from the New York attorney general’s office to both FanDuel and DraftKings seeks information about the sites’ operations, including who sets the players’ values and what limits there are on having employees place bets on rival sites.
Regulators say the sites can apply for licenses.
Daniel Wallach, a sports law expert from Florida, said the board’s decision is not going to cause an extinction of fantasy sports from Nevada, forevermore.
While thisiIndustry notice is meant 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.