Is fantasy football gambling? Yes, says Nevada.
DraftKings and FanDuel insist they are legal under a 2006 federal law that exempted fantasy sports from an online gambling prohibition. Why does Nevada's attorney general disagree?
(AP Photo/John Locher, File)
As more states scrutinize the daily fantasy sports industry, the office of Nevada's attorney general said it used DraftKings' own words and online images as evidence the sites qualify as gambling.
A day after Nevada regulators ordered the sites out of the state unless they get a gambling license, a memo issued Friday cited a three-year-old online "Ask Me Anything" interview on Reddit.com where the office of the state's attorney general said DraftKings CEO Jason Robins compared his site to a casino and described the concept as a mashup between poker and fantasy sports. The memo also pointed to text attached to images on DraftKings' website that used the word "betting" to describe it.
DraftKings and others in the fantasy sports industry, including competitor FanDuel, have insisted their sites aren't gambling and are legal under a 2006 federal law that exempted fantasy sports from an online gambling prohibition.
"It appears that although the sites' representatives publicly state that they do not believe daily fantasy sports involve 'wagers' or 'bets,' they do use the terms 'betting' and 'wagering' when they are not dealing with law enforcement agencies," the memo noted.
A transcript of the interview that remains online doesn't identify Robins by name but an introduction indicates the three men who started DraftKings were answering the questions.
DraftKings did not immediately respond to requests for comment.
In less than two weeks, the two high-profile companies in the ever-growing industry had gone from being a seemingly unstoppable, untouchable force to facing intense scrutiny of their business practices and legality from investigators, lawmakers, regulators and even their own players after it was revealed employees often played on competing sites, raising questions about possible insider information being used to win.
Nevada's determination is being watched by other states and lawmakers weighing whether the sites constitute gambling or not based on their own laws.
Participants on the unregulated sites can compete in games involving professional or college sports, paying an entry fee that goes into a larger pool. They try to assemble teams that earn the most points based on real-life stats in a given period with a certain percentage of top finishers earning a payout.
Entry fees on DraftKings range from 25 cents to more than $5,000. Some prizes top $1 million.
Neither DraftKings or FanDuel have said if they'll pursue a license in Nevada, a process that costs $500 up front as well as hourly costs and travel expenses to cover the intense background investigation by state agents into the companies and their leaders. DraftKings said in its email to customers it would work to ensure Nevada residents could play on the site again soon without saying how they would do so.
The sites will likely be making their case for legalization across the country, if they haven't already, as lawmakers and regulators pore over their own gambling laws and wonder where sites like DraftKings and FanDuel fit in.
California Assemblyman Adam Gray, D-Merced, who introduced a bill to legalize fantasy sports there, said Nevada's decision provided more evidence of the need for oversight.
"Even church fundraisers for bingo night have some oversight. With the amount of money we've seen and the amount of participation we've seen in California and across the country, we've got to have some regulation," he said in a telephone interview.
A Pennsylvania lawmaker who had originally proposed legalizing the sites now wants to ban daily fantasy sports unless they are operated by the 12 casinos in the state.
Illinois regulators think daily fantasy sports is illegal under a state law prohibiting Internet gambling, but they plan to ask their state attorney general for a legal opinion next week. In Ohio, the issue is for state lawmakers since the contests don't fit neatly into state's definition of casino games.
Delaware finance secretary Tom Cook, whose office oversees lottery and casino operations, said state officials are reviewing Nevada's actions evaluating whether any of its conclusions would apply in Delaware, which allows parlay bets on NFL games as one of only a handful of states where legal sports wagering is allowed.
Michigan has been reviewing if the state's criminal gambling laws apply to daily fantasy sports before Nevada's decision Thursday, but "obviously it's something that would be taken into consideration," said Michigan Gaming Control Board spokeswoman Mary Kay Bean.
Mississippi's gambling commission is also looking into the issue. The group's executive director, Alan Godfrey, said the Nevada decision could have influence elsewhere.
On Friday, DraftKings and FanDuel took a cue from another prominent tech company spurned by Nevada that was eventually welcomed back: get an angry public to petition lawmakers and make it legal.
Like the ride-hailing app Uber before it, the two titans of the daily fantasy sports industry sent links to an online petition to Nevada customers.
But as The Christian Science Monitor reports, there's another group with an opinion about fantasy sports play: gambling addiction counselors.
Forbes reports that fantasy sponsors have argued their business actually prevents gambling, protecting “the traditional American values [sports] should represent,” but gambling specialists say they’re one and the same. A ThinkProgress report argues that fantasy sports, particularly in their new, popular one-day-play format (versus an entire season), are “probably addictive, potentially illegal and completely unregulated.”
FanDuel and DraftKings claim to use software that can identify and interrupt potentially-compulsive team owners, but counselors observe that that’s not enough. So long as fantasy sports are not technically considered gambling, there’s no pressure for operators to address addiction. Keith Whyte, executive director of the National Council on Problem Gambling, tells ThinkProgress that operators don't need to be "a counselor." But, he adds, "it is their role to say that if you have a problem, get help."
Associated Press writers Don Thompson in Sacramento, Calif., Peter Jackson in Harrisburg, Pa., Randall Chase in Dover, Del., Sara Burnett in Chicago, Jeff Karoub in Detroit and Ann Sanner in Columbus, Ohio, contributed to this report.