Daily fantasy sports companies suffered another blow this week as authorities in Nevada deemed them gambling enterprises and ordered them to suspend operations in the state until they have proper licenses.
Nevada regulators ordered the firms, including popular DraftKings and FanDuel, to cease operations as of Thursday, and those that fail to comply could face felony charges including fines and imprisonment.
"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 play within the State of Nevada, a person must possess a license to operate a sports pool issued by the Nevada Gaming Commission," Nevada Gaming Control Board chairman A.G. Burnett wrote after the ruling, which counters the companies' positions that they are games of skill rather than chance and therefore not gambling.
Daily fantasy sports is a booming business that remains largely unregulated.
However, the multibillion-dollar industry came under fire this month over allegations of "insider trading" after revelations that an employee of DraftKings had won $350,000 on rival site FanDuel.
The employee was accused of using data not available to the general public—such as information on which players were the most popular fantasy picks—to help win big on the other site.
Both FanDuel and DraftKings have said internal investigations showed no wrongdoing.
However, four lawsuits were filed in the past week in federal courts in New York, Illinois and Louisiana accusing the DraftKings and FanDuel sites of cheating.
State and reportedly federal investigations have also been launched into the industry, which has operated outside the US ban on online sports betting.
FanDuel said in a statement released Thursday night that it is "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," Justin Sacco, director of communications for FanDuel, said in the release.
"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."
DraftKings also issued a statement saying they "strongly disagree" with the opinion of Nevada regulators but will disable their product in the state.
The American Gaming Association issued a statement in response to the Nevada ruling.
"The casino gaming industry has repeatedly called for greater legal clarity on daily fantasy sports," the AGA statement said. "We appreciate that the Nevada Gaming Control Board has provided that clarity as well as a roadmap for DFS companies and casinos to provide popular fantasy sports within Nevada borders.
"We will continue to seek additional clarity in other jurisdictions, as eliminating ambiguity is in the best interests of all parties, including consumers."
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