Sandoval to fantasy sports CEOs: Let’s see your ideas on regulations

Stephan Savoia / AP

In this Wednesday, Sept. 9, 2015, photo, an employee in the software development department of DraftKings, a daily fantasy sports company, walks past screens displaying the company’s online system stats in Boston.

The future of daily fantasy sports in Nevada continues to hang in the balance, but it’s a bit brighter after a meeting of the newly reconvened Nevada Gaming Policy Committee Monday in Las Vegas.

Gov. Brian Sandoval, state regulators, casino executives, state lawmakers and daily fantasy sports executives all appeared eager to find a path forward to bring daily fantasy sports back to the state. Daily fantasy sports sites ceased operating in the state in October after state regulators determined that their activities were considered gaming under state law and that their operators must hold a sportsbook license in order to legally offer daily fantasy sports in the state.

In January, Sandoval announced he was reconvening the gaming policy committee specifically to address daily fantasy sports, in addition to skill-based games and the state’s interactive gaming agreement. The first meeting focused entirely on daily fantasy sports, with presentations on its history, relevant laws as well as appearances by the CEOs of both DraftKings and FanDuel, the industry's leading companies.

Early on, some of the committee members expressed hope that existing regulations held the key to allow the industry to operate in Nevada.

“I think we have the infrastructure right now to regulate it with the laws we have on the books,” said Tony Alamo, head of the Nevada Gaming Commission, adding that another option was to go to the Legislature to fine-tune some of the statutes.

The state’s attorney general has said that, under current Nevada law, daily fantasy sports operators must be licensed to operate legally in the state. On the flip side, some committee members raised concern that designating those operators as sportsbooks would make it illegal for them to operate in other states.

Under federal law, only Nevada and three other states are allowed to legally engage in sports betting.

“The problem is that Catch-22 for us. We would love to see your industry prosper and grow,” said Blake Sartini, CEO of Golden Entertainment. “But our attorney general has already stated it’s a sportsbook, and anything in conflict with that in another state is going to pose a problem for us.”

Aside from that issue, the top executives of FanDuel and DraftKings told the committee they had concerns about the state’s existing regulations. DraftKings CEO Jason Robins called the process “overly onerous,” while FanDuel’s CEO Nigel Eccles deemed it “heavy handed.”

“The bottom line and the main reason we don’t feel like the type of regulation we’re being asked to administer is right for our industry,” Robins said, adding that the current level of regulation would stymie the budding industry's innovation.

Robins said he would be “reluctant” to apply for a sportsbook license.

Pressed for details by commissioners, neither CEO had specific criticisms of the current regulations or a better framework to recommend, saying they weren’t familiar with the nuances of Nevada law. Still, both agreed that some level of regulation was appropriate and that they were looking forward to working with the state on a compromise.

The question that remains is how.

“That’s something I hope is going to come out of this committee, a recommendation or investigation into another category of licensure that address this business model,” Sandoval said.

Sandoval told Eccles and Robins that he fully expected the two to prepare “meaningful proposals” on how to move forward.

“Whatever those recommendations look like later on, as we go into (the legislative) session hopefully we will have made a lot of progress,” Sandoval said. “No session is easy and no session is guaranteed. The more work that can be done early the better.”

To that end, the commissioners heard testimony from a variety of gaming officials, consultants and lawyers on the history of daily fantasy sports to frame future discussion.

Chris Grove, a consultant for the online gambling industry, urged a nimble regulatory approach not only for daily fantasy sports but generally for future innovations in the gaming industry.

“A regulatory approach should appreciate that these products can rise very quickly and can become cultural phenomenons in a brief period of time,” Grove said. “There’s something about that reality that does call for the regulatory approach to anticipate that these products might enter the picture, but also that their entrance is inevitable and will be far more rapid than craps or faro.”

The committee also briefly touched on skill-based gaming and how it related to daily fantasy sports. Proponents of daily fantasy sports operators say it’s a skill-based game, since the player’s research in building rosters determines the outcome.

In Nevada, the two aren’t mutually exclusive: a bill passed during the last legislative session created a path to skill-based slot machines, and with daily fantasy sports, regulators acknowledge that it may have a skill element but that it is still considered gaming.

But until the laws on daily fantasy sports are black and white, traditional gaming operators will be reluctant to get involved with it, said Geoff Freeman, president and CEO of the American Gaming Association.

“They don’t fit into the traditional regulatory and statutory silos,” Freeman said. “They’re new platforms that present unique sets of questions.”

Sandoval said the committee would likely have three more meetings before the end of the year, in May, August and October. The committee will likely take up skill-based games and the state’s interactive gaming agreement at its May meeting, while focusing on daily fantasy sports again in August.

The final meeting will provide an opportunity for the committee to make recommendations ahead of the 2017 legislative session.