Nevada, the state that legally allows you to play blackjack in the paid company of a hooker while both of you are strapped with concealed firearms, is drawing the line on these fantasy sports sites.
Nevada regulators ruled on Thursday that playing daily fantasy sports should be considered gambling, not a game of skill, and ordered websites like DraftKings and FanDuel to stop operating immediately in the state until the companies and their employees receive state gambling licenses.
This is not just a repudiation of "Greg from Operations" - who keeps telling everyone to refer him as "RotoWizard" because he 'skillfully' drafted Devonta Freeman in the 8th round of your office league - but a major salvo fired at two startups now valued at well over $1 billion apiece.
FanDuel and DraftKings have pulled down hundreds of millions each from big time media investors like 21st Century Fox (DraftKings), Comcast and Google (FanDuel), all while operating in a very legal gray area.
DraftKings and FanDuel, each valued at more than $1 billion, have operated under an exemption to the Unlawful Internet Gambling Enforcement Act of 2006, which outlawed online poker and sports betting. Five states have prohibited them from operating, but none are as powerful and influential as Nevada, which has long been a bastion of legal gambling, operates under strict regulation, and has the nation’s only active sports betting.
That exemption-based business model, and recent accusations on insider trading-esque behavior by employees of both companies, has drawn a lot of Federal eyes to a niche industry so unregulated that it makes shadow banking look bureaucratic by comparison.
While Nevada is notoriously "Cool" when it comes to stuff like this, it does have an entrenched gaming industry (including a number of sports books) that it needs to protect, which makes the decision a little less righteous. That said, Nevada is the state most qualified to be the arbiter what it and isn't gambling.
“The Nevada Gaming Commission concluded that daily fantasy is gambling and needs to be licensed here,” said David Gzesh, a Nevada lawyer specializing in gambling and sports law. “It should give other state’s pause because if it’s perceived as sports gambling here, no other state can offer it when it violates federal law.”
If Nevada is going to say that this sh!t looks fishy, politically ambitious DAs and Federal prosecutors will up their interest in daily fantasy and get a few scalps to mount on their wall in lieu of the stuff that they can't get their arms around.
*Cough* Preet Bharara *Cough*