In an order filed by the Gaming Control Board Thursday, the agency said daily fantasy sports websites, such as DraftKings and FanDuel, can apply for a Nevada gaming license to operate a sports pool. The Control Board issued a "cease and desist" order that bans the websites from Nevada.
"Since offering daily fantasy sports in Nevada is illegal without the proper license, all unlicensed activities must ceases and desist from the date of this notice," wrote Gaming Control Board Chairman A.G. Burnett.
Burnett said Nevada sports book operators could offer daily fantasy sports, however, they "should exercise discretion in participating in business associations with daily fantasy sports operators that have not obtained Nevada gaming approvals."
Added Burnett in an interview, "We're not saying they can't do (daily fantasy sports). We're saying they can do this as long as they have a gaming license."
The Control Board, through an "exhaustive analysis" by the Nevada Attorney General's office, determined daily fantasy sports constitutes sports wagering.
According to the analysis, the Control Board determined that daily fantasy sports involves "wagering on the collective performance of individuals participating in sporting events." To "expose" the websites for play in Nevada, the operator would need a sports pool gaming license.
The Control Board decision goes against the arguments made by daily fantasy sports companies that they are games of skill and not gambling. The daily fantasy sports sites also said they were not bound by the 2006 Unlawful Internet Gambling Enforcement Act, which prohibits financial transactions associated with online wagering.
Eilers Research gaming analyst Adam Krejcik said the ruling by Nevada, "wasn't the nail in the coffin, but it certainly adds another element to a complex issue."
Krejcik expected the big daily fantasy sports companies would go along with the ruling and halt operations. He expects players would be refunded any deposits.
A spokesperson for DraftKings did not respond to an email seeking comment.
"I wouldn't expect them to stay in and fight," Krejcik said. "(Nevada) is not a meaningful market."
The concern, he said, is what other states will now do with the Nevada decision. So far five states besides Nevada have banned daily fantasy sports websites.
Jeff Ifrah, a Washington, D.C.-based gaming attorney, said he disagreed with the conclusion reached by Nevada. But he believes individual states have the power to regulate games within their borders.
"Although Congress may have exempted DFS from federal laws involving gambling, it remains up to the states to decide whether DFS as games of skill fall within the available exceptions to prohibited games of chance," Ifrah said. "I believe the industry would greatly benefit from state attorneys general and legislators speaking to this issue and consumers of course would welcome the clarity and legal certainty."
In a statement, American Gaming Association President Geoff Freeman said the organization "has repeatedly called for greater legal clarity on daily fantasy sports."
Freeman said the Control Board offered "a roadmap for DFS companies and casinos to provide popular fantasy sports within Nevada borders." He said the AGA would "continue to seek additional clarity in other jurisdictions, as eliminating ambiguity is in the best interests of all parties, including consumers."
The move by Nevada comes a day after the Wall Street Journal reported that the U.S. Justice Department and the Federal Bureau of Investigation were looking into the business model of daily fantasy sports operators and trying to determine whether they violate federal laws.
Last week, FanDuel and DraftKings, which control 90 percent of the daily fantasy sports market, undertook steps to repair public damage when it was learned a DraftKings employee won $350,000 in a FanDuel contest reportedly by using inside information. The two sites spent an estimated $60 million on advertising during the opening weekend of the National Football League, often giving daily fantasy sports more attention than the actual game.
Several members of Congress, including Rep. Dina Titus, D-Nevada, have called for hearings on the legality of daily fantasy sports, questioning if the activity is skirting the 2006 Unlawful Internet Gambling Enforcement Act, which prohibits financial transactions associated with online wagering.
Last summer, the Control Board cautioned casino and sports book operators to keep their distance. Several operators have said the activity is gambling.
"I think the Gaming Control Board's notice speaks for itself. It shouldn't come as a surprise," said William Hill U.S. CEO Joe Asher, whose company operates sports books throughout Nevada.