Daily fantasy sports could make a comeback in Nevada

Stephan Savoia / AP

Daily fantasy sports operators DraftKings and FanDuel proposed legislation today seeking to re-enter Nevada, but gaming officials are worried the regulation language isn’t in line with the state’s strict gaming rules.

The proposal would exclude fantasy games from being classified as gambling, though it would hand the oversight to state gaming regulators. It would require DraftKings and FanDuel to pay an annual license fee up to $10,000, for owners with at least a 15 percent stake in a company to identify themselves to the state, and limits play to those 18 years or older. The proposal caps civil penalties at $1,000 for violations and requires an annual audit.

DraftKings and FanDuel stopped operating in Nevada last fall after a Gaming Control Board notice said the activity amounted to gambling and directed operators to obtain sports book licenses.

“We believe this legislation is a significant proposal from the industry,” Scott Ward, a lobbyist for FanDuel and Draft Kings, told the committee today during the company’s first presentation since March.

But the group of regulators, executives and policymakers criticized the proposal.

They said it could allow the industry to operate under a lax regulatory framework, where operators would not be fully vetted and might receive weak punishments for violations. Gaming Commission Chairman Tony Alamo called the proposal “regulation light.” MGM Resorts International CEO Jim Murren said he wants to see daily fantasy sports here but said the proposal was “far too short and unnecessary.”

Gov. Brian Sandoval, who also expressed skepticism, encouraged the industry to open a dialogue with regulators, addressing some of their concerns before the committee makes its policy recommendation by Sept. 30.

“The door’s open,” Sandoval said. “I feel like there’s a perception that this state is intransigent and is unwilling to be flexible. But on the other hand, I also kind of hear the same thing on your side that you’re intransigent — ‘that we have our business model and we’re not willing to really move outside of that model.’ I think it’s unfair to both (sides). But there is an opportunity here.”

After hearing the concerns of the committee, Ward said that DraftKings and FanDuel would be open to working directly with the committee to potentially strengthen the language and regulatory oversight.

“I’ve heard the critical comments from all of you,” Ward told the group. “We want to be your partner, despite what you may think has occurred in the past. … I take it as, let’s find a way to make this work.”

Compared to larger states such as New York and California, Nevada presents a small market for DraftKings and FanDuel, but receiving permission to operate here — a state with stringent gaming laws — would be a public-relations win for the companies that have come under much national scrutiny.

Unresolved is whether the policy committee would recommend legislation that would designate daily fantasy as something other than gambling. In testimony for DraftKings and FanDuel, Ward argued that the companies presented new technology that did not fit within the state’s current regulatory framework.

He acknowledged that if the companies applied for a gaming license in Nevada, it would conflict with laws in other states. Citing experiences in other states, Ward said legislation could resolve this issue.

“We have to be able to offer this product as its being offered across the country,” Ward said.

Gaming Control Board Chairman A.G. Burnett questioned that logic and asked to see a legal opinion.

Others were concerned that under the proposed statute, it would cost more to regulate daily fantasy operators than the revenue they would generate. In the proposed statute, Nevada would collect up to $10,000 in an annual license fee but no taxes. Some regulators found this concerning, given that New York’s Legislature required the companies to pay an annual fee of up to $50,000 and a tax on revenue.

New York’s gaming commission granted the companies permission to operate on Monday. DraftKings and FanDuel halted business there after its attorney general likened the daily fantasy to illegal gambling. The companies were able to return after the New York legislature defined the activity as a game of skill.

Under the proposed rules, Nevada’s ability to dictate rules in daily fantasy contests would also be limited because the contests are national. Sandoval also raised concern about regulating age restrictions and a worry that the proposal did not do enough to require criminal background checks for operators.

The draft language from DraftKings and FanDuel also received pushback from sports books.

Executives from seven companies, including William Hill U.S., Caesars Entertainment Corp. and Boyd Gaming, signed onto a six-page letter from Station Casinos that outlines issues with the draft legislation. The letter calls the proposed system a “significant departure” from Nevada’s statutory framework.

“If the current regulatory structure is not accommodative to the daily fantasy sports wagering model, then perhaps regulations can be adopted to facilitate such wagering — so long as they adhere to the requirements of Nevada’s statutory structure,” wrote Scott Nielson, executive vice president and chief development officer for Station Casinos. “The proposed legislation clearly fails to do so.”

In a separate letter, Murren elaborated on some additional concerns with the proposed legislation. He expressed concern about the lower age restriction and a different tax rate for daily fantasy companies.

The Associated Press contributed to this report.