Nevada — a state that knows what is and isn’t gambling — has shut down daily fantasy sites until they receive a license from the state’s gaming commission. Nevada is not accepting the argument that DFS is a game of skill and instead has characterized DraftKings and FanDuel as gambling. DFS is already illegal in Arizona, Iowa, Louisiana, Montana, and Washington, and with Nevada issuing a cease and desist to these sites, it could cause a domino effect.
This isn’t the end of the legal battle for these sites. The DOJ, FBI, and other state’s governments are looking into the daily sports companies’ legality and business practices. That means additional states could opt to suspend service while the investigations continue, which would most likely be met with lawsuits from DFS operators. If more states follow Nevada’s decision, and it cuts down on DraftKings and FanDuel’s business, it could be crippling to an industry that has some big name and big money investors.
Nevada is a tricky case. The casino lobby holds a lot of power in the state, which could have resulted in a concerted push to act against DFS. This isn’t the first time casinos have targeted online wagering. The rise, and quick fall of online poker is an example of what could happen to these DFS if the lobbyists get their preference.
All of the breaking news seems to be bad for DraftKings and FanDuel (Note: USA TODAY Sports operates DFS FantasyScore), however there has been an uptick in entries since the insider information scandal broke. It looks as if the market and consumers won’t stop DFS, state and federal government might.
Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.