Nevada Takes Hard Look At Future Of Daily Fantasy Sports; DraftKings, FanDuel Speak On Regulation

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Nevada Gaming Policy Committee hearing

The Nevada Gaming Policy Committee discussed the daily fantasy sports industry at length on Monday, with government officials and gaming industry executives agreeing that the state would like to take the lead on regulating the industry in the U.S.

It appears likely that the NGPC will eventually recommend some sort of changes to current regulations to better fit daily fantasy sports, even if the current regulatory scheme in Nevada can work with the industry. No actual recommendations actually came, and the committee indicated it would meet again to discuss only fantasy sports.

Most of the panel seemed to agree that DFS is a form of sports betting and is gambling, a concession the industry — in the form of DraftKings‘ and FanDuel’s CEOs — was not willing to make.

Some of the meeting can be viewed here.

Overview of the DFS meeting and the NGPC

In the meeting in Las Vegas, the committee — an advisory panel for the state — discussed DFS (along with other topics) and heard testimony from industry experts and executives, including DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles.

The committee is chaired by Nevada Gov. Brian Sandoval, and includes gaming regulators, lawmakers and executives from gaming companies in the state.

The meeting came about six months after the state declared that DFS is a form of gambling that requires a license to operate. That led all DFS operators to leave the state. Only one operator has publicly acknowledged applying for a license.

DraftKings: What CEO Jason Robins had to say

The CEOs of the two biggest DFS companies spoke late in the proceedings.

Robins indicated how much his company, DraftKings, would like to be back in Nevada, and talked about its past relationship with Las Vegas as a place to hold its live finals. He also noted that the industry reached out to the state attorney general last September, before the AG’s opinion on fantasy sports.

“Now the fantasy sports industry is ready to join hands with Nevada to figure out a common-sense regulatory framework to allow companies to safely and responsibly operate here,” Robins said, citing successful efforts in other states.

Sandoval asked if DraftKings was reluctant to apply for a gaming license under the current scheme, which would treat DFS as sports pool wagering. Robins agreed that his company would be reluctant to do so, and would hope to work with Nevada on legislation that would avoid that designation.

As Sandoval pointed out, that likely can’t happen until the legislature meets again, in 2017.

“We don’t feel that the type of regulation that we’re being asked to administer is appropriate for our industry,” Robins said. “But the exact form of regulation that has been proposed, we don’t think is appropriate for the fantasy sports industry, given that it is a new technology, and something different than what was contemplated when those laws and regulations were written.”

Robins said the main points he wants to see addressed in regulation in Nevada and elsewhere includes:

Some of the members of the committee challenged DraftKings’ reluctance on being regulated under the current scheme.

That included Tony Alamo, chairman of Nevada Gaming Commission, who questioned Robins calling the current gaming licensing procedure “onerous.” He asked whether DraftKings had tried to start the licensing procedure, and Robins indicated that he was not aware of exactly what licensing involved in Nevada, but DraftKings had looked into it. The issue would come up again when Eccles spoke next.

FanDuel: What CEO Nigel Eccles had to say

Eccles followed Robins in giving comments and answering questions. He largely talked about the history and evolution of fantasy sports and its daily iteration in his comments before turning to regulation.

“Today I want to correct one popular misconception about the industry: We are and always have been supportive of regulation,” Eccles said, mentioning the Fantasy Sports Trade Association paid-entry contest operator charter that he drafted.

He also touched upon a FanDuel advisory panel headed by former Homeland Security secretary Tom Ridge, as well as his call for government regulation last year.

Like Robins, he said he hoped to start a dialogue with Nevada about how to regulate industry.

“In short, we are committed to operating legally, ethically and with integrity,” Eccles said.

Sandoval also pressed FanDuel about whether it was interested in being licensed under the current structure in Nevada. Eccles also sounded skeptical about doing so.

“We’ve seen an explosion of innovation and new ideas and new concepts,” Eccles said. “Again, I would be concerned about heavy-handed regulation. We want to create that innovation. If we create regulation that is heavy-handed, it may kill it. I don’t want regulations where only two companies can operate in that environment.”

Alamo again questioned why FanDuel — like DraftKings — had not seriously entertained the idea of being licensed in Nevada.

“There are a lot of people, smaller than you, with less money and less financial means, that go through the process of licensure,” Alamo said, adding that he believed that DraftKings and FanDuel should go through the current licensing process in the state before moving forward.

Of course, because of the perceived stigma of applying for a gaming license in Nevada, DraftKings and FanDuel may not be willing to do so.

Opening comments

The NGPC, which does not meet regularly, was convened by Sandoval largely to discuss the issue of DFS.

“We will start an important discussion on daily fantasy sports, a dynamic field that demands our attention,” Sandoval said.

Boyd Gaming CEO Keith Smith spoke after Sandoval. Smith, in the past, has been outspoken about DFS, saying that it is a gambling product. On Monday, Smith dismissed the idea that the gaming industry is worried about any in-roads and competition the DFS industry offers to traditional gaming.

“Our view of daily fantasy sports, first and foremost, is this is not a competitive issue as we discuss this within the industry,” Smith said. “Oftentimes people confuse the fact that we’re interested in this topic because it’s competitive. And the reality is our sportsbooks do quite nicely….This is not about a competitive issue. This is about fairness and about consumer protections.”

He talked about the concerns that land-based casinos have had about the industry for some time, that the legal gray area surrounding DFS has made it impossible for regulated gaming companies to get into the business.

Those concerns were repeated Geoff Freeman, president of the American Gaming Association, later in the meeting.

The gaming regulator perspective

Tony Alamo, chairman of Nevada Gaming Commission, said the recommendations of the NGPC will serve to advance policy decisions in the state regarding DFS.

“What I’d like to see done through this day…I’m hoping we demystify the myths and legends, the language and vocabulary that’s kind of propagated out there regarding daily fantasy sports,” Alamo said, alluding to the skill vs. gambling debate hanging over the industry.

“I think you are going to hear more about those two words that keep getting tossed around: ‘Skill’ vs. ‘chance,” Alamo said. “The Gaming Control Act… if you do a ‘find’ function in there, you don’t see the words ‘skill’ or ‘chance’ defining what gaming is.”

Alamo also said he thinks DFS should be looked at as a positive for the gaming industry.

“I do want to set a tone here, that daily fantasy sports is good. It’s a fabulous thing,” Alamo said. “It creates excitement for a sport. It puts people in the stands….it creates increased viewership. It excites the sports, so people walk into our sports and race books and, directly or indirectly, will put money down. It creates handle, increases profits, increases gross gaming revenue for the state, and taxes.”

Alamo said he believes Nevada already has the infrastructure to deal with DFS, but he wondered aloud if there is a better way to do it than how Nevada’s gaming regulations already prescribe.

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