Despite Order From Regulators, DraftKings Not Fully Blocking Daily Fantasy Sports Play From Nevada

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UPDATE 10/21: We are no longer able to access DraftKings from Nevada under the conditions described below.

UPDATE 10/18 9:11 PM PDT: We are still able to enter new real-money contests while located in Nevada under the conditions described below.

UPDATE 10/18 3:53 PM PDT: DraftKings has issued a statement regarding their approach to blocking play in Nevada.

Tests by LSR reveal that, as of October 18, DraftKings is not fully blocking players located in Nevada from entering real-money contests despite an order from regulators requiring DFS sites to cease operations in the state.

Meanwhile, operators including FanDuel and StarsDraft blocked our identical attempts at entering real-money contests while located in Nevada.

Nevada Gaming Control Board Chairman A.G. Burnett told LSR via email that “we are aware of this and the matter is being looked into by the GCB Enforcement Division.”

“We have been doing our own testing as well,” Burnett continued. “If the decision is made to prosecute, the potential exists for both felony and misdemeanor violations. We will consult with our counsel at the Nevada Attorney General’s Office. ”

How we entered new contests on DraftKings from Nevada after the site claimed to block players from doing so

  1. We were physically located in Paradise, Nevada at the time of the initial test (October 17 at ~2pm PST — two days after DraftKings said they had cut off new contest entries from NV).
  2. We connected to the Internet using a laptop and a Wifi connection via a major Las Vegas ISP.
  3. We did not employ any technology designed to disguise our location or IP.
  4. We confirmed that our IP address was located in Nevada before logging in to DraftKings.
  5. The DraftKings account we logged into had a mailing address located in another state listed in the account information.
  6. Under the conditions described above, we were able to enter new real-money contests on DraftKings without restriction.

The implication is that anyone physically located in Nevada can still play for real money on DraftKings as long as the mailing address listed on their account is from another state (excluding other blocked states).

We were asked to confirm via a check-box that we were “not a resident” of Arizona, Iowa, Louisiana, Montana, Nevada, or Washington State. We checked the box. No further verification occurred.

Our results seem at odds with a statement from DraftKings on October 15 regarding the company’s position on serving customers in Nevada:

Unfortunately, we now have to temporarily disable our product for our thousands of customers in Nevada in order to be compliant in all jurisdictions.

Our results appear to directly clash with a description of DraftKings’ “sophisticated methods” for identifying user location that a company spokesperson provided to LSR on October 16:

We are able to track location a variety of ways and have sophisticated methods both internally and via third parties to ensure we are complying with the law in all jurisdictions.  Some of these tools include IP tracking, verification through payment methods and GPS tracking on mobile devices. Our fraud team explores all incidents.

But our ability to enter new contests despite the ban appears to generally confirm what a DraftKings employee told players on TwoPlusTwo last year regarding the company’s approach to identifying a user’s location (emphasis ours):

You will not be able to use the mobile app to make financial transactions or deposit with paypal on the website but every other function of the site works based on your established residence.

DraftKings does appear to restrict accounts with a mailing address located in Nevada from entering new real-money contests.

And that restriction appears limited to the account itself and not the IP address or any other identifying characteristic connected to the user or their device.

“Regulators (or perhaps prosecutors) will certainly want to know how many Nevada residents played in DraftKings contests since Friday,” gaming attorney Daniel Wallach said after reviewing our test. “That will go a long way to determining whether any criminal charges are brought.”

The failure of DraftKings to identify our location “raises questions about the efficacy of other internal controls and safeguards,” Wallach said.

Other major DFS operators recognized our Nevada location and blocked us from entering new contests

We conducted an identical test at FanDuel and StarsDraft on October 17.

Both sites immediately recognized our location within Nevada and explicitly prohibited us from entering real-money contests.

Both sites identified our location as a blocked or prohibited location in the message explaining why we were prohibited from entering real-money contests.

We did not test additional sites. It is possible that DraftKings is not alone in its approach to blocking activity in Nevada.

Why this matters

These are the key takeaways:

  1. When Nevada requested that DFS operators stop accepting play from “within the State of Nevada,” they weren’t referring solely to residents of Nevada. The point of concern is a player’s location when the bet takes place. The idea that regulators would ask DFS sites to block residents located in the state but not visitors located in the state from playing DFS is a non sequitur.
  2. DFS operators avoid allowing play from five states due to legal concerns. Our ready access to DraftKings in Nevada raises serious questions about how effective the safeguards for blocking play from those states are, how often circumvention is attempted, and what systems DFS sites have in place for identifying such attempts and responding.
  3. The fact that different DFS operators take different approaches with varying levels of efficacy to these existential issues is another obvious point in favor of regulation and dramatically increased transparency.

Regulated online gambling sites in Nevada use sophisticated location-identification technology

The failure of a daily fantasy sports site to employ sophisticated location identification software represents a unique threat in Nevada.

State regulators are well-versed in the issue of location verification thanks to the Nevada’s regulated online poker and mobile sports betting products.

LSR spoke with several people familiar with the situation who asserted that most major daily fantasy sports operators do not deploy geolocation tools that rise to the level of sophistication and accuracy of the geolocation tools utilized by state-regulated online poker or sports betting providers.

Gus Fritschie, the CTO of SeNet International, a firm that focuses on gaming security, to LSR that based on the brief tests he performed “it appears likely that it would be possible to enter contests on sites that are only performing IP-based geolocation by utilizing a proxy service such as Tor or other IP spoofing techniques.”

“In order to comply with state restrictions the sites need to employ robust geolocation services that go beyond just IP data as in regulated jurisdictions such as Nevada and New Jersey,” Fritschie added.

So what is DraftKings using to identify player location?

From the outside, we’re left to guess.

All we know for sure is that DraftKings is not blocking us from entering new-real money contests when we’re clearly located in Nevada.

Based on feedback and commentary from various sources, DraftKings appears to focus their location identification efforts on a few points:

  1. A player’s mailing address.
  2. Location analysis at the point of depositing and withdrawing, possibly piggybacking off of the geolocation tools utilized by their payment processing partners.
  3. Third-party location identification baked into a user’s mobile device.

That combination would fall far short of the geolocation technology employed by regulated online poker operators in New Jersey or Nevada.

UPDATE: Statement from DraftKings

DraftKings released the following statement to LSR at 3PM PDT on October 18:

On Friday 10/16 we notified all Nevada customers of the issue and requested that they withdraw all funds and close their accounts. We also implemented blocking mechanisms for Nevada residents from creating new accounts, depositing money or playing new games.  Because our game is nuanced in the fact that we allow late swaps we allowed players who had already entered games on Thursday to be able to continue their full experience with the product until games close and are paid out on Monday regardless of their location.

I have requested clarification on how we were able to enter new contests while located in Nevada as recently as Sunday, October 18 at 9pm PDT — two days after the threshold described above.

I have also requested clarification if “blocking mechanisms” are intended for: