Governor wants Nevada to take lead on daily fantasy sports issues

Before October, most states took a hands-off or wait-and-see approach in regard to legalities surrounding daily fantasy sports.

Then Nevada pulled the plug in the industry and other states followed.

Gov. Brian Sandoval now wants the Gaming Policy Committee to figure out the next steps for a business model that shows no signs of disappearing.

The committee, led by Sandoval and including regulators, lawmakers gaming operators and public representatives, will take up several issues when it meets in the coming weeks.

Daily fantasy sports, however, is the proverbial elephant in the room.

"I think this is a discussion we need to have," said gaming attorney Scott Scherer of the Holland and Hart law firm, one of the committee's public representatives. "Nevada has the expertise to get out in front and look at this."

The Gaming Control Board, based on an opinion by the attorney general, issued an industry notice in October that said daily fantasy sports constituted sports wagering. Operators of the websites needed to "cease and desist" operations in Nevada unless they were licensed by gaming authorities.

DraftKings and FanDuel, the sites that control 90 percent of the fantasy sports market, withdrew from the state. Others followed.

In recent months, attorneys general in New York, Illinois and Texas reached similar conclusions: Daily fantasy sports is sports gambling. That led to a legal challenge in New York and threats of proceedings in other states. Why? Excluding California, the three states have the largest pool of daily fantasy sports players.

"We weren't looking to pick a fight," Paul Charchian, president of the Fantasy Sports Trade Association told The Dallas Morning News earlier this month. "But the fights have come to us."

In a presentation last month, Eilers & Krejcik Gaming principal Adam Krejcik said more than half of the U.S. states block one, two or all of the daily fantasy sports operators for various reasons. But 15 states are considering some form of legislation addressing daily fantasy sports, including California, Texas, New York, Pennsylvania, Illinois and Florida.

Krejcik noted the number of states considering daily fantasy sports legislation surpassed the number of states considering Internet gaming legislation for the first time.

Massachusetts, home state of DraftKings, is exploring daily fantasy legislation. The Gaming Commission drafted a white paper on the subject, including how the agency could regulate the activity.

Which leads us to Nevada.

Sandoval has not revealed his plans for the Gaming Policy Committee. He said in the announcement that "there is no better place in the world to host this important conversation than Nevada."

Committee members have ideas on what they would like to see.

MGM Resorts International Chairman and CEO Jim Murren, a longtime proponent of the gaming industry advancing technology in casinos, said the debate can't be about whether daily fantasy sports is gambling or a game of skill, as has been advocated by the business operators and its trade association. That issue has been determined by Nevada.

"We need to do what Nevada has done before," Murren said. "We need to lead and have a robust discussion in the public domain. Millennial customers have little interest in the type of game product we've been providing. The tastes are changing, and we can't bury our heads in the sand and wish it all away."

Boyd Gaming Corp. CEO Keith Smith said the state should look at daily fantasy sports in the same manner as Internet poker. If it's legal, then regulate it and let the market decide if daily fantasy sports is a viable product the casinos could offer to their customers.

"Internet gaming is small here, and some offer it and some don't," Smith said. "The same thing will happen with daily fantasy sports."

Murren and Smith both said they have not spoken with Sandoval about his plans for the committee. They also agreed with the Control Board's October notice.

Control Board Chairman A.G. Burnett, who will take part in the committee's discussions, said the attorney general's ruling has been misinterpreted outside of Nevada. No one said daily fantasy sports was illegal. To offer it, operators need to be licensed.

"We didn't kick anybody out," Burnett said. "All we said is play by the rules. This board has been progressive toward innovation."

Representatives of the daily fantasy sports community are expected to participate in the Policy Committee's hearings. They may raise the game of skill aspect once again.

But even the activity's strongest supporters are softening the stance. Mark Cuban, owner of the NBA's Dallas Mavericks and an investor in two daily fantasy sports companies, told The Dallas Morning News the industry will have to deal with regulations and taxes.

Scherer, a former Control Board member who served in Nevada Assembly, said daily fantasy sports could fall under a new set of regulations that would need both legislative and gaming approval.

"My gut instinct tells me there will be some type of regulation," Scherer said. "What's appropriate and fair to the existing industry will be part of the debate. I think Nevada has the resources, and it makes sense for us to take the lead."

— Howard Stutz's Inside Gaming column appears Wednesdays and Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Find on Twitter: @howardstutz