It’s been a bad couple of weeks for the daily fantasy sports gaming industry, as accusations of insider information coupled with growing questions of fairness and lax oversight put the industry’s two biggest sites—DraftKings and FanDuel—in the crosshairs of federal investigators. On Thursday, the Nevada Gaming Commission delivered a serious, if symbolic, blow to the sites by ruling them games of chance, not skill, and ordered them to shutdown operations in the state until they obtained a gambling license. DraftKings is based in Boston and FanDuel is headquartered in New York City.
While Nevada is only one state, its determination that the sites qualify as gambling is what the upstart world of daily fantasy sports is worried about. The industry has been able to thrive by sidestepping the 2006 Unlawful Internet Gambling Enforcement Act that outlawed online sports betting and poker. The distinction written into the law that allowed the sites to evade the same regulatory oversight as those forms of online gambling is that fantasy sports are, allegedly, games of skill, not chance.
Nevada regulators disagree and ordered the sites to shut down effective immediately in the state of Nevada, effectively prohibiting residents of the state from participating. While Nevada is not the only state to outlaw the practice (the games are legal in 45 states), nor the first state to investigate the industry, the state, as home to the casino industry does have a particular interest in having the sites shuttered, as the multi-billion dollar daily fantasy sports gaming industry has risen swiftly and significantly enough to become unwelcome competition for the state’s bread and butter.
“Lawmakers have been intensifying calls for federal regulation and inquiries into the industry,” according to the New York Times.
Last week, the New York attorney general opened an inquiry into the prospect that employees of DraftKings and FanDuel won lucrative payouts based on information not available to the public. In addition, three class-action lawsuits have been filed alleging fraud — the most recent in Louisiana, where the operation of daily fantasy sports sites is prohibited… In Washington, Representative Hakeem Jeffries, Democrat of New York and a member of the House Judiciary Committee, this week called on the panel to examine “whether permitting a multibillion-dollar industry to police itself serves the best interests of the American people.” Senator Robert Menendez and Representative Frank Pallone Jr., Democrats of New Jersey, held a news conference Tuesday outside MetLife Stadium, the home of the Giants and the Jets, to reiterate their calls on the Federal Trade Commission to implement safeguards and ensure a fair playing field. And Senator Richard Blumenthal, Democrat of Connecticut, on Monday formally called for a federal investigation into any deceptive or fraudulent practices at daily fantasy sports leagues.