Daily fantasy sports (DFS) companies FanDuel and DraftKings were dealt their first post-scandal regulatory blow on Thursday when the state of Nevada became ruled that DFS is gambling. The Nevada Gaming Control Board issued a notice that read, “Since offering DFS in Nevada is illegal without the appropriate license, all unlicensed activities must cease and desist.”
The Scandal
DFS has faced unprecedented scrutiny following the recent discovery that a DraftKings employee with access to non-public DFS data won $350,000 playing DFS on FanDuel’s site. Employees of both companies are now banned from playing on rival sites.
The First Domino?
Legalized gambling plays a huge role in Nevada’s economy, so the state is far from typical when it comes to gambling regulation. FanDuel and DraftKings now hope that Nevada’s ruling on the illegality of DFS will be an isolated occurrence.
Nevada may be the first state to change its stance on DFS following the scandal, but it’s not the first to ban the games all together. DFS is already banned in Iowa, Wisconsin, Arizona, Louisiana and Montana.
What’s Next?
Initial returns in the weekend following the scandal showed the publicity DFS gained from the controversy may have actually been good for business, as both FanDuel and DraftKings reported NFL season-best weekends. However, the Nevada ruling could take a healthy bite out of the companies’ user bases.
In addition, other investigations and probes of DFS remain ongoing. Last week, the New York Attorney General opened an investigation of DFS practices. In addition, the FBI has reportedly opened a probe of DFS as well.
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