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Nevada Closes Fantasy Sports Sites, Good Sign for Casinos?

Nevada's Gaming Control Board has reportedly ordered the shutdown of fantasy sports sites like FanDuel Inc. and DraftKings Inc., stating that these sites will no longer be allowed to operate without a gambling license. The decision comes in the wake of reports that their employees also often played on competing sites, raising questions about possible insider information being used to win games.

Chairman of Gaming Control Board A.G. Burnett stated that daily fantasy sports constitute gambling and therefore operators must own a sportsbook license in order to legally offer the same in Nevada. In the absence of the license, operators are expected to face fines and 10 years in prison for running an illegal gambling site.

Meanwhile, the board stated that it has worked for several months regarding the legality of the sites. In fact, casino and gaming companies such as MGM Resorts International MGM and sports book companies such as William Hill Plc WHM.L are frustrated with the acts of fantasy sports companies for what is considered as unregulated gambling.

However, per the order, Nevada customers are allowed to take part in fantasy sports DraftKings and FanDuel in another state, such as California.

Operators Defensive

In response to the gaming board's notice, FanDuel and DraftKings, the two leading daily fantasy sports providers, have reportedly stated that they are ceasing operations in Nevada. However, they are of the view that the games are based more on skill and not luck. They state that these sports are protected by the 2006 Unlawful Internet Gambling Enforcement Act as per which there are specific exemptions for fantasy sports.

Is the Regulation Good for Casino Companies?

The shutdown can prove beneficial for casino companies like Las Vegas Sands Corp. LVS , Wynn Resorts Ltd. WYNN and MGM Resorts that have properties in the region. People would now move to the casinos to try their fortunes. An increase in footfall at the casinos would prove beneficial as these are bearing the negative impact of a sluggish environment in Macau, another key operating destination for these companies. Revenues in Macau have not increased for 16 consecutive months. (Read: Gaming Stocks in Focus as Macau September Revenues Fall )

In fact, FanDuel has reportedly stated that it is disappointed by the board's action and believes that only the casinos in Nevada are the ones that will be benefitted by the action.

Uncertainty Ahead

It is quite clear that state regulators consider daily fantasy a form of gambling and hence any company willing to provide it must be licensed. There is no update on whether FanDuel and DraftKings would return to the state. These sports sites and others have three options: apply for a license, challenge the board's decision or remain out of the state. Also, it remains to be seen whether any of the established Nevada gaming operators will enter the fantasy sports market.

Whatever the outcome, it is expected to impact casino operators like Las Vegas Sands, Wynn Resorts and MGM Resorts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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