Nevada Shuts Down Unlicensed Daily Fantasy Sports

In the latest regulatory salvo involving daily fantasy sports (DFS), the Nevada Gaming Control Board (NGCB) declared pay to play DFS to be gambling and has required DFS operators to cease and desist from operating in Nevada unless and until they are licensed in the state. Based on its analysis, the regulators determined that unlicensed pay to play DFS violates Chapter 463 of the Nevada Revised Statutes as a game or gambling game. It noted that DFS involves wagering on the collective performance of individuals participating in sports events and that operating a sports pool requires a license.

The NGCB further stated that entities licenses to operate a sports pool may expose DFS in Nevada for themselves, but that they cautioned against entering into business association with entities who are not appropriately licensed in the state.

This ruling is that latest setback for an industry where player demand seems insatiable but regulatory scrutiny is growing.

Many people have mistakenly stated that the Unlawful Internet Gambling Enforcement Act (UIGEA) makes fantasy sports legal. In fact at least one daily fantasy sports site states that DFS is 100% legal.

The reality is that UIGEA includes a limited exception for fantasy sports, subject to a number of conditions. This means that for fantasy sports offerings where the conditions are satisfied, UIGEA does not apply to those offerings. It does not broadly declare fantasy sports to be legal, particularly under state law.

In fact, it is common for many fantasy sports operators to exclude certain states from eligibility.

The facts regarding the business models for various fantasy sports offerings can differ. To assess the legality of any offering, all of the facts must be considered under the federal laws and the laws of the 50 States.

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