"Nevada, deep down inside, would like to have it and regulate it. It's another profit center," said Alan Silver, a professor at Ohio University who used to work for and is widely consulted by the gaming industry.
"Fantasy sports appeal to the younger demographic," he said, noting that millennials are less likely than previous generations to go to casinos to play traditional table games, which are Nevada's gambling bread and butter. "If it were put into play and if it was regulated by Nevada, that's going to be another way to get millennials into the casinos."
In New York, DraftKings and FanDuel went to court in November, after Democratic Attorney General Eric Schneiderman moved to shut them down. At a State Supreme Court hearing, lawyers for the two companies argued their activities were not gambling and were permitted under a 2006 federal law that had exempted fantasy sports from a ban on processing online financial wagering. But lawyers in Schneiderman's office maintained that the games were based on luck — not skill — and were prohibited as gambling. A decision is expected this month.
DraftKings operates out of Boston, where Democratic Attorney General Maura Healey decided to regulate the industry, not ban it. The proposed Massachusetts regulations aim to protect consumers. They prohibit anyone under 21 from playing, require age verification, and ban betting on college sports, which makes up a fraction of the daily business, according to Eilers Research. The proposed rules would officially take effect Jan. 22, but Healey called on the industry to start obeying them now, and the industry has been mostly receptive.
As the legal controversy over Internet fantasy games heated up, FanDuel CEO Nigel Eccles called for "strong, common sense, enforceable consumer protection requirements" from states, to include age requirements, protection of personal information, individual player accounts and third-party audits.
The company, however, said daily fantasy sites didn't want to be lumped in with casinos by regulators. "We … welcome the opportunity to work with attorneys general in all states, along with other lawmakers, to implement fair regulations that benefit both consumers and sports tech innovators," a spokeswoman said.
DraftKings did not respond to repeated requests for comment. Earlier, it called the New York attorney general’s decision "hasty," and said it would be willing to work with states and other "relevant authorities to ensure that our industry operates in a manner that is transparent and fair for all consumers."
Billions of dollars are at stake in courts and statehouses for the sites and their high-profile investors. Fox Sports and NBC Sports, MLB and the NHL, Time Warner and the Kraft Group, which owns the New England Patriots, have invested in FanDuel and DraftKings. Forbes reported that FanDuel had raised an estimated $361 million from media companies, while DraftKings had raised $375 million total.
In Pennsylvania, legislators have begun studying how to regulate and tax fantasy sports sites. The House Gaming Oversight Committee held a hearing in November, and Republican Rep. George Dunbar is readying a bill.
"The industry needs regulation," Dunbar said in an interview. "The issue is who regulates them. In my opinion, it is gaming and it should fall under our Gaming Control Board."
But, he said, he is considering an "Internet gaming act" that would allow casinos already in the state to have websites at those locations that could run Internet poker and other games. "This could force Internet fantasy daily sports to run through our casino sites," he said.
He said the legislation, still being drafted, would include a one-time $1 million casino fee to be paid by the sites and a $5 million fee paid by the casinos to include the games as part of their operations. The profit margin that a casino makes off the sites would be subject to state taxes. Pennsylvania has one of the highest casino tax rates in the country at 55 percent.
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