Somewhere in America right now, someone — probably a man between 18 and 49 years old — is sweating his fantasy sports roster, preparing to place a wager on the real-life performance of his favored players. Which NFL quarterback will throw more touchdowns? Which NBA point guard will sink more baskets? The United States and Canada boast more than 56 million fantasy sports players who wager millions on such questions — many after doing more research than is needed to spin a roulette wheel.
“They do their homework,” Jason Robins, the chief executive of fantasy sports Web site DraftKings, said last month, comparing his enterprise to chess. “It’s like the stock market. They enjoy looking at something and trying to figure out something that someone else doesn’t see.”
But weeks after New York’s attorney general announced an investigation into DraftKings and rival FanDuel for possible corruption, a state regulator in Nevada has ruled that daily fantasy sports (DFS) — in which players wager on athletes’ performances on a single day rather than over entire seasons — is not a game of skill, but gambling. This was the distinction behind a Nevada Gaming Control Board ruling Thursday banning the Web sites from the Silver State.
“Since offering daily fantasy sports in Nevada is illegal without the proper license, all unlicensed activities must cease and desist from the date of this notice,” wrote Gaming Control Board Chairman A.G. Burnett. In an interview with the Las Vegas Review-Journal, he added: “We’re not saying they can’t do [DFS]. We’re saying they can do this as long as they have a gaming license.”
The ruling went even further: It said that existing sports books could offer daily fantasy — but cautioned them to “exercise discretion in participating in business associations with DFS operators that have not obtained Nevada gaming approvals.” A sign saying “Do not do business with DraftKings and FanDuel” would have been no less clear.
Predictably, the Web sites were not happy.
“We understand that the gaming industry is important to Nevada and, for that reason, they are taking this exclusionary approach against the increasingly popular fantasy sports industry,” 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.”
“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 in a statement. “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.”
Fantasy football fans were also dismayed.
“The Nevada decision is a blow for those of us who love daily fantasy sports, but that state usually finds a way of getting its casinos in on the action,” Matt Matros, a professional poker player who sometimes writes about gaming for The Washington Post, wrote in an e-mail.
The companies, however, said uncle.
“Because we are committed to ensuring we are compliant in all jurisdictions, regrettably, we are forced to cease operations in Nevada,” FanDuel concluded. DraftKings will also “temporarily disable” services, it said.
The ruling pounded a nail in the heart of an almost decade-old legal technicality — and, to some, a legal fiction — that allowed fantasy sports to thrive online even as Internet poker was squashed and brick-and-mortar casinos, particularly in Atlantic City, struggled to survive. How could this shady-seeming enterprise exist — indeed, be aligned with the NFL, among other professional sports organizations — while similar endeavors were regulated out of existence?
The reason: Fantasy sports were explicitly given a pass.
“The Unlawful Internet Gambling Enforcement Act of 2006 specifically mentions fantasy sports as something allowed under the law, as long as people are not betting on the outcome of a single game or the performance of a single player,” CNN Money’s Chris Isadore explained just last week. “Because fantasy sports ‘owners’ must make decisions to pick multiple players for their teams, they are participating in a game of skill. That legal status is unlikely to change.”
That prediction, however, proved wrong. As allegations of what amount to fantasy sports insider trading by a DraftKings employee and word of an FBI investigation into the industry circulate, the Nevada ruling upended conventional wisdom about the future of DFS. If one state kicked the door in, why wouldn’t another — perhaps New Jersey, which is trying to legalize sports betting in its casinos?
“Although Congress may have exempted DFS from federal laws involving gambling, it remains up to the states to decide whether DFS as games of skill fall within the available exceptions to prohibited games of chance,” Jeff Ifrah, a D.C.-based gaming attorney, told the Las Vegas Journal-Review. “I believe the industry would greatly benefit from state attorneys general and legislators speaking to this issue and consumers of course would welcome the clarity and legal certainty.”
New Jersey seems particularly eager for “clarity.”
“Daily fantasy sports is an industry crying for consumer protection,” Rep. Frank Pallone (D-NJ), who called for an investigation of the industry last month, said earlier this week. “Despite its explosion in popularity and the allegation of ‘insider trading’ by employees of daily fantasy sports operators, the industry is operating in a void within the legal structure – without any regulation or the necessary transparency.”
He added: “It’s unregulated. It’s like the Wild West.”
For many, the reckoning DraftKings and FanDuel now face was long in coming.
“On the spectrum of legality to illegality, they’re getting pretty close to the line,” Ryan Rodenberg, an assistant professor of sports law at Florida State University, said two years ago. “It’s tough to make an intellectually honest distinction between the two.”
After all, one man widely viewed as the godfather of fantasy sports hasn’t been shy about acknowledging that it is gambling.
“Of course it is,’’ said Brian Okrent, a fantasy baseball pioneer. “The distinction people are making … ‘it’s a game of skill.’ Well, poker is a game of skill. Blackjack in a casino is a game of skill. Picking horses is a true game of skill, and nobody would pretend that that’s not gambling.”