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Nevada bans daily fantasy sports, deems it gambling

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There's potential bad news for DraftKings and FanDuel today, as the Gaming Control Board has officially banned unlicensed DFS games in Nevada. Could this be the beginning of the end for pay-to-play sports businesses in the United States?

Could increased regulation of DFS contests spell trouble for DraftKings & FanDuel?
Could increased regulation of DFS contests spell trouble for DraftKings & FanDuel?
Kirby Lee-USA TODAY Sports

It was only a matter of time. Following last week's investigation into the data scandal surrounding employees of DraftKings and FanDuel, a frenzy of media attention brought the key debate of whether daily fantasy sports qualifies as gambling back into the spotlight.

News emerged today that the Gaming Control Board of Nevada, the state most closely associated with gambling in the United States, has come to the conclusion that DFS does indeed qualify as gambling:

The support for the legality of daily fantasy sports in the US has so far hinged on the "game of skill" argument--that is, because choosing the correct players to deliver points in a given contest depends on the knowledge of the participant, it shouldn't qualify as a "game of chance"--but the authorities have moved to circumvent that argument altogether. A.G. Burnett, chairman of the Nevada Gaming Control Board, stated the following in response to questions from ESPN:

"A lot of people have the idea that all of gambling is determined by skill versus chance. That's just not the case, because in a state like Nevada, our statutes and definitions override that."

It's not all quite as bad as it sounds, however, as the ban only applies to DFS sites without a gaming license. DraftKings and FanDuel can both apply for a gaming license to be able to legally provide their services to Nevada residents, though that may mean significant changes to how the companies are able to operate.

Nevada isn't the first state to ban daily fantasy sports--other states where DFS is currently illegal include Arizona, Iowa, Louisiana, Montana and Washington--but it is certainly the most significant given the legalized gambling that takes place in Las Vegas. With the cease and desist order currently only applying to unlicensed providers, it's a safe assumption that Nevada is just looking to get their share of the massive profits being generated by DraftKings and FanDuel at the moment--just look at their omnipresent ad campaigns for proof of their popularity and success in 2015--but this development does portend some potential problems for the fantasy giants.

If other states follow suit and the stipulations of the gaming license change the overall scope of how these companies operate, we could see suffer the same fate as online poker websites like FullTilt, PokerStars and UltimateBet that have fallen victim to the Unlawful Internet Gambling Enforcement Act of 2006.

It is important to note that at this time the Act does not apply to fantasy sports that meet certain requirements (specifically, whether the game is constituted as a "game of skill"), but with Nevada's assertion that the game of skill argument doesn't apply it will be interesting to see how things shake out. As the negative media attention continues to swirl around these companies, more sponsors (such as Major League Soccer) could jump ship and eventually result in enough of a revenue hit for the providers that they're unable to advertise so extravagantly.

Neither DraftKings nor FanDuel have commented as yet about this latest development. This issue is far from settled, though, so for the time being you can continue to build your lineups and take part in daily fantasy sports in the United States, provided you aren't a resident of the aforementioned states.