What Fantasy Sports Players Should Know Amid Increasing Scrutiny
Nevada bans sites like FanDuel and DraftKings until they get gambling licenses.
— -- The stakes may be getting higher for sports fantasy players in the face of increased scrutiny of popular websites, with Nevada, for instance, most recently requiring the sites to have gambling licenses.
The Nevada Gaming Control Board's gaming commission Thursday said daily fantasy sports is gambling and ordered websites like FanDuel and DraftKings to halt operating in its state immediately until the companies receive state gambling licenses.
Arizona, Iowa, Louisiana, Montana and Washington have reined in fantasy sports with varying restrictions. And the future of sports betting, in general, is uncertain in states like New Jersey.
Though that state passed a law allowing sports betting, the second attempt to legislate the issue, a federal district court has held it to be unlawful under the Professional and Amateur Sports Protection Act. A three-judge panel of the Third Circuit Court of Appeals upheld that decision, but the full circuit later vacated that decision and agreed to hear the case.
As for Nevada, DraftKings said in a statement, "We strongly disagree with this decision and will work diligently to ensure Nevadans have the right to participate in what we strongly believe is legal entertainment that millions of Americans enjoy. Unfortunately, we now have to temporarily disable our product for our thousands of customers in Nevada in order to be compliant in all jurisdictions.”
FanDuel echoed that statement and said it was "terribly disappointed that the Nevada Gaming Control Board has decided that only incumbent Nevada casinos may offer fantasy sports."
"This decision stymies innovation and ignores the fact that fantasy sports is a skill-based entertainment product loved and played by millions of sports fans," FanDuel said. "This decision deprives these fans of a product that has been embraced broadly by the sports community including professional sports teams, leagues and media partners. We are examining all options and will exhaust all efforts to bring the fun, challenge and excitement of fantasy sports back to our Nevada fans. In the interim, because we are committed to ensuring we are compliant in all jurisdictions, regrettably, we are forced to cease operations in Nevada.”
Here's what fantasy sports players should know:
1. Is a player’s money “safe” when they participate in these sites?
Daily fantasy sites are subject to the same generally applicable consumer protection rules as other kinds of consumer services businesses, said Behnam Dayanim, partner at law firm Paul Hastings. The sites aren't subject to the more stringent rules that apply to gambling companies or other financial institutions, such as banks or money transmitters.
The Fantasy Sports Trade Association, an industry association comprised of many fantasy sites, has a charter that calls for members to segregate player funds, but it is self-enforcing and therefore depends on the good faith of the businesses themselves to comply, Dayanim said.
2. Will Nevada’s decision set a precedent for other states?
Nevada's situation is distinctive in a few ways, Dayanim said.
"Most notably, Nevada is permitted under federal law to offer sports betting, which is how the Gaming Control Board has classified daily fantasy," he said. "No other state possesses quite the same latitude. As a result, if other states were to conclude that daily fantasy sports is sports betting, they likely would not be able to license it. In other words, daily fantasy sports would be outright prohibited.
"Interestingly, it is not entirely clear that Nevada may license daily fantasy under federal law. That is a question that remains for consideration," he said.
Every state's gambling laws are different, and what constitutes gambling in one state may not in another. Often, the state leans toward whether it's a game of chance or skill.
Marc Edelman, an attorney and associate professor at Zicklin School of Business at Baruch College in New York, said the law in Nevada does not seem nearly as adverse to ongoing gaming as the law does in other states where FanDuel and DraftKings continue to operate, such as in Arkansas, Tennessee and Florida.
"However, one also needs to keep in mind that the casino lobby is incredible powerful in Nevada and they probably pushed hard for the eradication of daily fantasy sports, or at least the requirement that these companies operate under the same set of regulations as the casinos," Edelman said.
3. What should players in Nevada know ahead of this weekend’s games?
Most reputable daily fantasy sports sites will not allow them to participate, as the industry, by and large, seems to be respecting the Gaming Control Board's determination, Dayanim said.
4. Can players in Nevada access the sites at all now? Can they provide another address outside the state to still play?
FanDuel geotargets and blocks entries and deposits, based on IP addresses.
Edelman said, "It would be foolish for a daily fantasy sports player based in Nevada to seek a website that is not blocking their entries, as such websites are both at high legal risk and may lack credibility. If playing daily fantasy sports is a truly a necessity, the smart player should travel to a jurisdiction where legality is less at risk and enter from there."
Existing Nevada customers will be able to access sites for the purposes of withdrawing existing funds, but not to play the games, David Copeland, CEO of SuperLobby.com, an aggregator of daily fantasy sports contests, told ABC News.
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