Daily Fantasy Sports Websites Banned by Nevada Gaming Control Board

Alec Nathan@@AlecBNathanFeatured ColumnistOctober 16, 2015

In this Wednesday, Sept. 9, 2015, photo, an employee in the software development department of DraftKings, a daily fantasy sports company, walks past screens displaying the company's online system stats in Boston. The daily fantasy sports industry is eyeing a breakout season as NFL games begin. And its two dominant companies, DraftKings and FanDuel, are touting lucrative opening week prizes to try to draw more customers as more competitors pop up. (AP Photo/Stephan Savoia)
Associated Press

One day after Brad Reagan and Devlin Barrett of the Wall Street Journal reported the FBI and Justice Department were investigating the legality of daily fantasy sports, the Nevada Gaming Commission made a stern decision regarding how the industry will be defined within the state. 

According to the New York Times' Joe Drape, the Nevada Gaming Commission ruled Thursday that daily fantasy sports sites like FanDuel and DraftKings have been classified as "gambling" and must "cease and desist" operations within the state. The Las Vegas Review-Journal's Howard Stutz reported daily fantasy sports sites will be eligible to apply for gaming licenses.

An official statement from the Nevada Gaming Control Board explained the legal minutiae behind the decision:

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. 

According to the Wall Street Journal, the FBI and Justice Department's investigation was rooted in defining whether daily fantasy's status was as a game of skill or gambling. 

Meanwhile, the NFL has spoken with the House Energy and Commerce Committee in an attempt to avoid a congressional hearing on the relationship between the league and fantasy sports, according to David Purdum of ESPN.com.

Daily fantasy sites have operated freely since Congress passed the Unlawful Internet Gambling Enforcement Act in 2006, which included an exemption for games of skill, according to the New York Times' Joshua Brustein.

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The industry has faced scrutiny in recent weeks on the heels of reports that a DraftKings employee may have used private data to gain a competitive edge over other players. As a result, New York Attorney General Eric T. Schneiderman has launched an inquiry into the potential use of data that is otherwise unavailable to the public, per Drape and Jacqueline Williams of the New York Times.

On Wednesday, a spokeswoman for DraftKings released a statement regarding the inquiries by the FBI and DOJ, per Reagan and Barrett: "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."

Chris Burke of Sports Illustrated provided a statement from the American Gaming Association:

According to the Associated Press (via Business Insider), those who operate daily fantasy sports sites now face up to 10 years in prison and felony fines if they operate in Nevada without a license.