The nationwide controversy over daily fantasy sports (DFS) and
how it is regulated has led Nevada Governor Brian Sandoval to
convene the Nevada Gaming Policy Committee for the first time since
2012.
Sandoval wants the Policy Committee to devise recommendations that
will “allow Nevada to continue to lead the nation and the
world in developing and maintaining the best policies and practices
involving the regulation of the gaming industry.” This
discussion, which is meant to lead to innovation in how Nevada will
deal with the quickly changing world of interactive and skill-based
gaming in addition to DFS offerings, is vital to understanding how
Nevada can remain the leader in the gaming industry and tap into
the huge interest in DFS-style offerings by today’s
market.
The state kicked off the nationwide discussion over whether DFS
should be regulated as gaming last October, when the Nevada
Attorney General’s office issued an opinion that DFS
offerings were sports wagering, leading Nevada’s gaming
regulators to announce that Nevada gaming licenses would be
required for DFS websites to offer their product to Nevada
customers. Several other states’ Attorneys General followed
suit, forcing the issue to the top of almost every state’s
list of hot legal topics.
Sandoval has asked the Policy Committee to “gather
information and provide recommendations on what is the best policy
for Nevada’s gaming future” as it regards DFS, among
other issues. As the world’s gold-standard gaming regulator,
Nevada often assumes a leadership role on gaming issues.
The Policy Committee was last convened in 2012 to discuss how
Nevada should regulate interactive gaming. The 2012
Committee’s efforts resulted in legislation enabling Nevada
to enter into interactive gaming agreements with other states.
Prior to that, the full group had not met since the 1980s.
The Policy Committee is chaired by Sandoval and includes among its
12 members representatives from Nevada’s gaming regulators
(Tony Alamo, Chairman of the Nevada Gaming Commission, and A.G.
Burnett, Chairman of the Nevada Gaming Control Board), Nevada
legislators, and members of the public and the gaming industry
(including Jim Murren, CEO/Board Chairman of MGM, and Keith Smith,
President of Boyd Gaming Corporation).
The Committee will consider input from various constituencies,
including the public, on DFS and other timely gaming policy issues
and will craft recommendations for the Control Board and Gaming
Commission. The recommendations of the Committee are not binding on
the gaming regulators but merely advisory.
The Committee’s initial meeting on March 7 served mainly as a
forum for experts in the gaming industry and leaders of the DFS
movement to share relevant research and information. Presenters
included Chairmen Alamo and Burnett, representatives of the
American Gaming Association (AGA), the Nevada Resort Association
(NRA), the Association of Gaming Equipment Manufacturers (AGEM),
the CEOs of DraftKings and FanDuel, and academic and legal gaming
experts, including Dickinson Wright attorney Greg Gemignani, who is
a long-time professor in gaming law at the UNLV Boyd School of
Law.
The discussion regarding skill gaming and interactive gaming
included that Nevada needs to ensure that its regulations allow for
speedy innovation to remain relevant for a younger generation that
will want to see games that incorporate social media and
video-gaming concepts. Marcus Prater of AGEM noted that he hopes
that gaming manufacturers will have hybrid games of skill and
chance on Nevada’s casino floors by early summer.
The DFS discussion, however, dominated the day, and several themes
became apparent throughout the meeting. First, almost all agreed
that DFS can be “good” – in that it has sparked
clear nationwide and even worldwide interest – and that it
needs to be incorporated in Nevada in some fashion to allow our
gaming industry to remain competitive. Everyone at the hearing also
agreed that DFS offerings must be transparent and regulated to
protect both consumers and the reputation of the gaming
industry.
Where the consensus began to break down was in how such regulation
should be structured. Several voiced concerns that Nevada’s
regulations need to be adjusted to keep pace with innovation and to
allow for a greater number of content providers to contribute.
Others noted that the black market for sports wagering far outpaces
the legal market and put forth an argument that can be summed up as
“citizens are going to find a way to wager on sports,
illegally or legally, so we may as well craft regulations to
protect them when they do so.”
Nevada’s gaming licensees’ concerns centered on
concepts of fairness. In particular, licensees want the opportunity
to take part in the booming DFS industry but are concerned that
even if DFS offerings were to be legalized in some form in Nevada,
they could still put their gaming licenses in jeopardy by
partnering with DFS companies if the DFS offerings violate federal
law or the laws of other states where they are being offered.
The DFS operators, while agreeing that they are open to some form
of regulation, argued that what they offer is not well suited to
what they termed Nevada’s “onerous” regulations
for gaming licensees. They are requesting Nevada to create a
“new box” for DFS offerings to be regulated.
Finally, the sword of Damocles hanging overhead is the fact that
there are at least two U.S. Attorneys that are investigating DFS
operators for violations of federal law. If a federal court
determines that DFS offerings equal sports wagering, much like the
Nevada Attorney General did several months ago, then federal laws,
including the Wire Act, could make unlicensed DFS offerings illegal
nationwide, despite any state regulations to the contrary.
In addition, a big issue hampering Nevada from taking fast action
on this issue is the fact that its Legislature meets only every
second year, with the next legislative session not until February
2017. This means that, short of calling a special session, any
changes to Nevada’s gaming laws to accommodate DFS-style
gaming will be on hold until next year.
While the Committee ponders how to deal with the offerings from
companies like FanDuel and DraftKings, however, DFS is showing some
signs of life in Nevada. Vic Salerno, a long-time Nevada gaming
business operator, has applied to become the first Nevada-licensed
gaming operator to offer DFS-style wagering with his new venture,
U.S. Fantasy (USF). Through USF, he will offer a fantasy sports
product that allows players to make fantasy-type sports wagers
utilizing the existing pari-mutuel system. USF will be
Nevada-licensed and will operate under existing Nevada gaming
statutes and regulations.
The Committee determined that it will meet three more times during
2016: in May to discuss interactive and skill gaming issues, in
August to focus on DFS, and then again in the fall to deliberate
and craft its findings and recommendations. These recommendations
will be delivered to the Governor, the Nevada Gaming Commission,
and the Nevada Gaming Control Board just in time to craft
legislation for the 2017 Nevada Legislature to consider.
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