Nevada could emerge as a pivotal state in the American conversation over the legality of real-money daily fantasy sports contests.
Gaming regulators in the state have yet to directly address the issue. But Nevada Gaming Control Board Chairman A.G. Burnett recently told the Las Vegas Review Journal that DFS is “something we may have to look at in terms of it being legal under Nevada gaming law.”
“Gaming licensees,” Burnett added, referring to Nevada’s casino operators, “need to understand the legal issues if they step into that arena.”
Conflict brewing between commercial gambling and DFS
Burnett’s comments come against a backdrop of increasing clash between the U.S. commercial casino industry and the daily fantasy industry.
DFS by and large operates outside of the corporate sphere of the land-based casino industry. Similarly, DFS has been able to so far operate outside of the regulatory apparatus that accompanies commercial gambling activity.
The tension between:
- The widespread perception of DFS as a gambling product and
- The strategy of the DFS industry to lobby for legal and regulatory classification as a non-gambling product
… is starting to manifest in increasingly direct and public challenges to DFS from powerful names in the commercial casino camp.
“Any suggestion that (fantasy sports) is not gambling is the biggest bunch of baloney I’ve ever seen,” Joe Asher, CEO of sports book operator William Hill U.S., told the LVRJ.
Jim Murren, CEO of MGM Resorts International, offered a similarly blunt assessment in April. Anyone who considers DFS something other than gambling, Murren said, is “absolutely, utterly wrong.”
The American Gaming Association, a trade group for the U.S. commercial casino industry, is currently studying the issue and is expected to issue a report this fall.
If the report contains a consensus opinion from the group’s members on DFS, it could fundamentally alter the trajectory of the market for daily fantasy sports.
How Nevada could impact the legal landscape for DFS
The topic of American gambling law is a complex one, and the subtopic of where daily fantasy sports fits in is more complex still.
Here’s a good primer on some of the fundamental legal questions surrounding DFS.
But you don’t need to know much to understand why a decision by Nevada officials to challenge the legality of DFS could have significant effects that ripple across other states.
The broad story:
- State law is ultimately what matters when it comes to gambling. Federal law can supplement state law, but, generally speaking, federal law never makes a form of gambling legal that would otherwise be illegal under state law. The upshot: the UIGEA exemption for fantasy sports does not equal a blanket exemption from state gambling law.
- State gambling law is often highly subjective. What separates gambling from non-gambling activity in many U.S. states is an incredibly subjective determination regarding the balance of skill and chance in an activity. There are no standard, quantifiable tests (or even any proven conceptual thresholds) for making these determinations. They are ultimately a matter of opinion.
- State law generally does not address fantasy sports specifically. With a few exceptions, DFS draws its legal justification on the state level from asserted similarities to other exempted activities (parimutuel wagering, sweepstakes, games of skill). That leaves DFS on shakier ground than activities that enjoy a specific, named exemption (horse racing, charitable gambling).
- State policymakers are just learning about DFS. The topic of DFS is familiar to those in gaming. But the rapid rise of DFS means that the vast majority of state lawmakers and regulators are still being introduced to the topic.
Put that all together and it’s easy to see how a negative directive from Nevada regulators could spur similar attitudes and actions in other states – especially states that regulate some form of non-lottery commercial gambling.
Will entrance of Amaya change the conversation?
Amaya, parent company of online poker giant PokerStars, is set to enter the American DFS market by the end of the year.
Should the launch go through, it would mark the most significant crossover between DFS and the American commercial gambling market.
Amaya is already licensed as a supplier in several American gaming jurisdictions and is expected to launch a consumer-facing online brand in New Jersey when PokerStars NJ receives final approval.
The entrance of Amaya will likely:
- Increase regulatory interest in DFS.
- Compound the public perception that DFS is gambling.
- Spur the entrance of other commercial gambling entities, amplifying the above effects.
It’s difficult, but not impossible, to imagine how DFS can remain isolated from the commercial gambling industry in the face of those and similar pressures.
