Daily fantasy sports, where you compete with other sports buffs to see who has the best line up of players in a given sport, has been booming for the last couple of years. Profits and valuations for the major players in the industry like FanDuel and DraftKings have also been soaring as tens of thousands of new players signed up to play.
That said, the fantasy contest providers are taking a 15% cut off the top in contests with entry fees ranging from $1 to $5000, and critics have called daily fantasy sports just another form of sports gambling.
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In today’s news, regulators from the state of Nevada have ordered daily fantasy sports sites to stop accepting players from their state, saying that this kind of business can’t operate in the state without a gambling license.
The fantasy sports sites claim their games are skill-based, not chance-base, and therefore not subject to gambling regulations.
Analysts note that additional attention from government regulators at all levels has dampened some of the excitement surrounding the industry. In fact, Nevada’s cease and desist order comes just a day a story broke claiming that the FBI had begun a probe into the practices of daily fantasy sports sites.
More on Nevada decision to ban daily fantasy sports
According to A.G. Burnett, the chairman of the Nevada Gaming Control Board, all unlicensed daily fantasy activities must cease and desist operations as of Thursday. He also noted that operators may be invited to apply for a Nevada gaming license. Of note, daily fantasy site operators who do not comply could face major fines and up to 10 years in prison.
“We are saying that daily fantasy sports are a gambling game under the statutory definition,” Burnett commented in an interview on ESPN on Thursday night. “We’re also saying that these are sports pools, which is when someone is in the business of accepting wagers on sporting events through any system or method of wagering. We have found that it is a wager, and obviously, it’s on a sporting event, and DFS companies are in the business of accepting those wagers.”
FanDuel, one of the biggest daily fantasy sports firms, said released a statement saying it is “terribly disappointed that the Nevada Gaming Control Board has decided that only incumbent Nevada casinos may offer fantasy sports.”