Nevada to DraftKings: Get a Gambling License or Get Out

The state most strongly associated with gambling has banned online gambling daily fantasy sport sites.

Welcome to Fabulous Las Vegas by WriterGal39 via Flickr/Creative Commons

Welcome to Fabulous Las Vegas by WriterGal39 via Flickr/Creative Commons

Popular daily fantasy sports sites like Boston-based Draft Kings are now banned in the gambling happy state of Nevada.

The Nevada Gaming Control Board ordered the sites to cease and desist all in-state operations on Thursday after determining they are unlicensed gambling operations and running afoul of state law. This is a stunning castigation for the booming online gambling daily fantasy sports sector. The industry has been beset in recent weeks by a series of public stumbles that included the revelation of insider trading, class action lawsuits, and an investigation by the Federal Bureau of Investigation. This latest blow in Nevada is serious because it forces the sites to face the unfortunate fact anyone with a modicum of brain activity already knows: daily fantasy sports games are gambling, not games of skill.

Admitting this would make the sites subject to all kinds of new rules and regulations, including additional taxation of gaming revenue. As a state that relies heavily on gambling revenues to fund its government, Nevada has a deep interest in getting “its cut” of daily fantasy sports profits. New taxes and regulation are only part of the problem this ruling presents for sites like DraftKings and FanDuel though as this ruling could influence federal regulators looking to squash the sites. If Nevada—the home of Las Vegas and Reno—thinks this is gambling what will the fun-hating federal government think?

Full ruling:

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.

DraftKings and FanDuel, along with other daily fantasy sports sites, have indicated they will comply with the board’s demands.