In fantasy sports, Las Vegas tech entrepreneurs see dream come true

David Stetler, a Las Vegas-based web developer, faces a unique challenge running an online service for players of daily fantasy sports. He often needs to check the sites of major operators like FanDuel but is barred from doing so from a Nevada computer because the company stopped operating here following a Gaming Control Board notice last fall.

A one-time professional poker player, Stetler started a service that uses algorithms to help users optimize their daily fantasy lineups. He started FantasyCruncher in 2014, nearly a year before the Gaming Control Board’s notice requiring the companies to apply for licenses. That prompted several operators, which considered themselves skill-based gaming companies, to leave Nevada.

But FantasyCruncher, as is true of a handful of companies that offer helper tools for daily fantasy sports players, still operates in Las Vegas within a niche for technology that supports daily fantasy users. Given gaming expertise in Las Vegas, some saw opportunities to build companies around daily fantasy sports. And because the Las Vegas-based companies weren't directly affected by the notice — their customers are daily fantasy sports players, who can still play legally in dozens of states — they decided to stay here.

"Las Vegas was really becoming the third spot for daily fantasy sports,” Stetler said.

One month before the October notice, Brett Richey’s mobile app BlitzPick went online. The tool, which targets casual users of daily fantasy sports or players who cannot invest the time to stay attuned to changing sports statistics, offers access to research on players' stats and health status and a lineup optimizer that takes into account a player's statistics, salary and other metrics.

Richey was a professional poker player in New York but was regularly playing in daily fantasy contests when he conceived the idea for the app. He moved to Las Vegas in January last year after recruiting a friend who worked in sports betting. BlitzPick is in the process of starting another round of funding and expanding its operation from four to seven employees.

Richey said the company was committed to remaining in Las Vegas, where it would like to form partnerships with gaming companies and take advantage of the expertise that exists in the city's sports betting industry.

“It’s important we have a Vegas footprint,” he said. “Even if we build a tech office somewhere else, we’ll always keep a part of our business in Vegas at least, if not the whole thing."

His company has run into a few obstacles. Richey said it was frustrating work in a physical location far away from BlitzPick's out-of-state end users. His app also was removed from the Google Play store when Google deemed that it facilitated gambling. Richey is appealing the decision. A spokesperson for Google Play said the company did not comment on why apps were removed.

In recent months, lawmakers and regulators have placed daily fantasy operators under increased scrutiny, with several states considering legislation concerning the sites. Nevada’s notice that operators must have a gaming license prompted several companies, including major operators FanDuel and DraftKings, to cease operations here. The most high-profile case has been in New York, where the companies are battling with the state’s attorney general on whether daily fantasy sports constitute illegal gambling. The companies agreed Monday to leave the market until a court hearing in September.

Even though Nevada users can no longer access FanDuel, the company still has Las Vegas ties. VTF Capital, the venture fund formerly known as VegasTechFund and initially created as part of Zappos CEO Tony Hsieh’s $350 million Downtown Project portfolio, is a FanDuel investor.

It is an unusual investment for a fund that primarily focuses on early-stage startups. FanDuel was valued at nearly $1.3 billion, the Wall Street Journal reported in July.

What made FanDuel attractive to VTF Capital, its managing partner Zach Ware said, was that it provided the investment team an opportunity to learn about what worked for daily fantasy companies, with the possibility of better understanding the future of the Las Vegas market.

"Given the enormous amount of entertainment technology talent in Las Vegas, there's a strong chance tomorrow's (daily fantasy sports) leader will be a company that gets its start in Las Vegas,” Ware wrote in an email. "Since we're local to Las Vegas (but don't focus our investments here) we felt that we needed to be more knowledgeable about an industry that may very well be a dominant technology sector for our local economy over the long term.”

Despite the presence of some companies, there is little debate that the requirement to obtain a license has put a damper on the industry in the state. There were at least two operators — GoDraft and Draft Ops — that incorporated in Nevada but dissolved their companies here last fall, according to the Secretary of State’s website. Draft Ops now is headquartered in California.

Stetler, who was raised in Las Vegas, thought about leaving after the regulatory notice but predicted daily fantasy’s absence would be temporary. A new gaming policy committee, comprising regulators, casino executives and lawmakers, met about the issue this month.

“I really don’t see a future where it doesn’t exist in Nevada,” Stetler said.

Las Vegas-based iTeam Network, headed by a former casino executive, licenses out a daily fantasy sports platform to its clients. It has no licensees in Nevada but is headquartered here. The chief executive, Gabe Hunterton, who worked at MGM Resorts International and Hong Kong-based Galaxy Entertainment Group, said it was an adjustment to be dislocated from users.

"As someone who spent their entire career in brick-and-mortar gaming, this has been a big change for me because it’s now sort of doing business in a virtual world,” he said last week.

But he seemed positive about the future of daily fantasy sports in the state.

"Las Vegas has for a long time been a place of innovation,” he said.