Nevada ruled on Thursday that playing daily fantasy sports is considered gambling and has ordered popular sites to shut down until they obtain state gambling licenses.
The decision means daily fantasy sites, such as DraftKings and FanDuel, will be required under Nevada state law to obtain a license to operate in the state. Currently, these sites operate under an exemption to the Unlawful Internet Gambling Enforcement Act of 2006, per the New York Times, and the fantasy sports industry has grown tremendously in recent years.
Currently, DraftKings and FanDuel are each valued at over $1 billion. Participants pay an entry fee to choose a lineup of players competing that day or week; depending on the performance of their lineup, players can win cash prizes up to $1 million.
Last week, FanDuel received backlash after allegations that its employees were profiting through essentially insider trading, resulting in a massive scandal that led to FanDuel banning employees from gambling on daily fantasy games.
Critics of daily fantasy sports sites have likened it to sports gambling, and while Nevada isn’t the first state to outlaw sites like DraftKings and FanDuel, as five states have already prohibited these sites from operating, according to USA Today, Nevada is the most influential as it is the only state with legal gambling.
“The Nevada Gaming Commission concluded that daily fantasy is gambling and needs to be licensed here,” said David Gzesh, a Nevada gambling and sports law attorney. “It should give other states pause because if it’s perceived as sports gambling here, no other state can offer it when it violates federal law.”
DraftKings and FanDuel have both released statements criticizing Nevada’s decision, and expressing their disappointment while maintaining the legality of daily fantasy sports sites.