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Nevada and other states reviewing legality of daily fantasy sports

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September 25, 2015 - 11:23 am
 

The number of states exploring the legalities surrounding the booming daily fantasy sports business is growing as fast as the business.

Massachusetts and California have joined Nevada in taking a potential stand on the business that has inundated the television airwaves with advertisements and sparked possible hearings in Congress. Bloomberg News reported that the two largest fantasy sports companies, DraftKings and FanDuel, generated $60 million in entry fees during the opening weekend of the National Football League.

Earlier this summer, Nevada Gaming Control Board Chairman A.G. Burnett asked the attorney general's office — the regulatory panel's legal arm — to analyze the legalities surrounding the issue and provide the three-member board some guidance.

The Control Board hasn't taken a formal position on daily fantasy sports, but has cautioned casino and sports book operators to keep their distance.

Burnett never issued a directive to avoid fantasy sports, but said in July that "gaming licensees need to do an analysis on the legal ramifications. They need to understand the legal issues if they step into that arena."

Several gaming leaders, notably MGM Resorts International Chairman Jim Murren and Joe Asher, CEO of sports book operator William Hill US, have publicly called out daily fantasy sports as gambling websites.

On Monday, Massachusetts Attorney General Maura Healey told reporters her office was reviewing the legalities of fantasy sports. She said officials from Boston-based DraftKings, one the industry's largest companies, initiated talks with her office.

"We're hearing them out on it," Healey said during an informal news conference. "We're just looking to learn more."

According to CardPlayer.com, California lawmakers amended a bill in Sacramento that would allow the state to regulate fantasy sports. The website LegalSportsReport.com says California is the 12th state to consider daily fantasy sports legislation.

Last week, Rep. Frank Pallone, D-N.J., the top Democrat on the House Energy and Commerce Committee, said he wants Congress to hold hearings to explore the legal status of fantasy sports.

Sports betting and daily fantasy sports will be discussion topics during several seminars next week as part of the Global Gaming Expo in Las Vegas. One seminar will explore that rapid rise and legal issues surrounding daily fantasy sports. DraftKings CEO Jason Robins is scheduled to be part of a panel discussing whether or not fantasy sports are a form of gambling.

American Gaming Association CEO Geoff Freeman said daily fantasy sports was an "exciting new platform." But the membership of the Washington, D.C-based trade organization called "the current lack of legal clarity" an obstacle that keeps commercial casino operators from jumping into the business.

"The industry agrees this is an issue that needs to be addressed," Freeman said in a statement.

Fantasy sports leaders said the federal government does not define fantasy sports as gambling. The Unlawful Internet Gambling Enforcement Act makes it illegal for banks or financial institutions to allow transactions for online wagering. However, there is "carve out" language that exempts fantasy sports, online state lotteries and horse racing.

DraftKings and FanDuel claim they offer games of skill and are not considered gambling websites.

"We are a U.S.-based skill games company and all of our contests are operated 100 percent legally under United States and Canadian law," DraftKings states on its website.

DraftKings and FanDuel have marketing deals with major sports leagues and ESPN, which is owned by the anti-gaming The Walt Disney Co.

Residents of five states — Arizona, Iowa, Louisiana, Montana, and Washington — can't participate in the websites because of state-specific regulations against cash prize awards.

Sports wagering is legal in four states, although Nevada is the only state with full-scale race and sports books.

LegalSportsReport.com editor Chris Grove told the Washington Post "there were more questions than answers" concerning fantasy sports and federal law.

"If you ask a person on the street, my sense is people would identify daily fantasy sports as a gambling product," Grove told the newspaper's "The Fix," calling his state a "cultural" response.

"The fundamental legal definition of what does or doesn't constitute gambling is generally set at the state level," Grove said.

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