LAS VEGAS (CN) - Nevada, of all places, has banned gambling on fantasy sports sites, as states, federal investigators and private litigants pursue inside-trading allegations against the billion-dollar industry.
Nevada banned fantasy sports betting sites on Oct. 15 as a form of unregulated gambling, after news surfaced that an employee of a major site, DraftKings, had won $350,000 gambling at the competing site, FanDuel.
Congress, the FBI and others are concerned that employees of one fantasy sports company can use information they acquire there as an unfair advantage to gamble on other sites.
Suspicion mounted then Sports Business Daily reported that in the first half of this year's Major League Baseball season, 91 percent of players' profits in daily fantasy sports games were won by just 1.3 percent of the players.
The July 17 story in Sports Business Daily said that more than 1.5 million Americans paid more than $1 billion in entry fees for fantasy sports sites in 2014, and that membership in the FanDuel site grew by 300 percent.
Major League teams in baseball, football and basketball have invested in the fantasy sites, as have major networks and distributors such as NBC, Fox and Comcast, The New York Times reported this month as investigations mushroomed.
At least 18 civil lawsuits have been filed this month accusing FanDuel of fraud and negligence, 15 of them class actions, according to the Courthouse News database. At least 20 similar ones have been filed against DraftKings in October, 18 of them class actions. After they made headlines, both companies said they have prohibited their employees from betting on other sites.
The FBI also is investigating whether the fantasy sites accept bets from states that prohibit such gambling, according to the Times Oct. 15 story.
Senator Richard Blumenthal, D-Conn., has asked the Federal Trade Commission and Justice Department to investigate the fantasy sports business.
The Nevada Gaming Control Board issued a cease-and-desist order on Oct. 15, saying that DraftKings, FanDuel and other fantasy sports sites can apply for Nevada gaming licenses to operate sports betting pools, but cannot continue providing the service to Nevada residents.
The Gaming Control Board said fantasy sports betting constitutes "wagering on the collective performance of individuals participating in sporting events," which requires a gaming license in Nevada.
In an Oct. 16 memorandum , Nevada Attorney General Adam Laxalt said fantasy sports betting could be an illegal lottery under state law.
"If the skill being assessed is that of actual players rather than that of the fantasy sports team owners, then daily fantasy sports constitute illegal lotteries. If the skill being assessed is that of the owners, then there is a factual question as to whether the skill in selecting lineups predominates over chance," Laxalt wrote in the memo.
Not all states are cracking down. Massachusetts Attorney General Maura Healey said on Oct. 7 that fantasy sports betting does not violate state or federal laws, so it is legal there. She told the Boston Globe she has no plans to investigate DraftKings, which is based in Boston.
The NCAA has banned advertising for fantasy sports sites during the NCAA men's basketball tournament - but not for other sports.
Saying fantasy sports betting is gambling, the NCAA on Oct. 20 notified DraftKings and FanDuel that it will bar them from advertising during the men's basketball tournament, but not during NCAA football playoffs, which the NCAA does not operate. The NCAA told the fantasy sports sites that it will no longer will meet with their company officials to discuss fantasy sports.
The NCAA told The Associated Press that it has a "longstanding" policy against accepting advertising from "sports-wagering entities."
"We believe that your product should not be offered in the college space for a variety of reasons," NCAA Executive Vice President of Championships and Alliances Mark Lewis said in Aug. 27 cease-and-desist letters to DraftKings and FanDuel. "We do not believe a further meeting with your organization will change that."
The NCAA said it is notifying its member colleges and universities that there are penalties for anyone participating in DraftKings and FanDuel fantasy sports leagues. The NCAA also bans referees and game officials from participating in fantasy sports leagues, and it wants help from the fantasy sports sites to ensure that none do so.
In fantasy sports, players act as team owners and draft teams with rosters of active professional athletes. Team scores are determined by player performance in games.
Instead of playing out the entire season, entire leagues are completed in a single day, and some play hundreds or even thousands of electronically selected daily fantasy teams in a day.
In the United States, NFL football and Major League Baseball draw the most participants, though NBA, soccer, and other daily fantasy sports are available.
About 56.8 million people in the United States and Canada play fantasy sports, which is a $3.6 billion-per-year industry, according to the Fantasy Sports Trades Association.
The business has grown quickly, up from only about 500,000 people in the two countries in 1988.
Nearly 90 percent of daily fantasy sports players in the United States and Canada are white, their average age is 34, 80 percent are male and 51.5 percent are not married, according to the Fantasy Sports Trade Association. More than 78 percent have at least a bachelor's degree, earn more than $92,000 per year, and nearly 70 percent prefer fantasy football.
The association says daily fantasy sports players on average spend 17.9 hours per week watching sports programs or participating online: 8.67 hours per week dedicated to their fantasy sports teams.
In the United States, about 95 percent of the daily fantasy sports market is dominated by DraftKings and FanDuel, with Yahoo a distant third.
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