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Nevada says daily fantasy sports sites are gambling and must halt operations

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The world of unregulated fantasy sports gambling may be coming to end it appears, starting first in Nevada. The state home to the country's most prolific gambling center has banned fantasy sports websites like DraftKings and FanDuel — which transformed fantasy sports into colossal gambling machines — after deciding that betting real money on imaginary sporting outcomes constituted unlicensed sports wagering. The sites can apply to the Nevada Gaming Control Board for a license to operate betting pools. Until then, however, fantasy websites will have to stop operations in the state after cease and desist letters were sent out, according to a report today from the Las Vegas Review-Journal.

The decision is the latest outcome of an unfolding scandal that erupted when DraftKings employee Ethan Haskell accidentally leaked confidential information earlier this month on the internet and went on to win $350,000 from rival fantasy sports site FanDuel. Haskell was cleared of any wrongdoing. Yet the ensuing controversy has ignited a debate around the enormous amount of money flowing into daily fantasy sports sites and whether websites are bypassing regulations laid out in the Unlawful Internet Gambling Enforcement Act of 2006, which banned online poker and other games in the US.

The beginning of the end for unregulated daily fantasy sports

Because daily fantasy sports sites consider the contest a game of skill, they are exempt from those online gambling regulations. That lets anyone pay an entrance fee and potentially win millions of dollars on a site like DraftKings or FanDuel, which both collectively control 90 percent of the market. The companies have become fixtures in the world of US sports, promising riches to millions of fans and acting largely without oversight. The industry, which has raked in hundreds of millions of dollars in investment from the likes of Alphabet Inc. (formerly Google), Comcast, and sporting leagues like the NFL, is now seeing major sponsors like ESPN distance themselves amid the controversy.

Both DraftKings and FanDuel have placed bans on their own employees from participating in daily games and hired investigators to review the respective allegations. Yet a wave of regulation is now crashing on the industry. DraftKings is dealing with Investigations from the FBI and US Justice Department. The attorneys general of New York and Massachusetts have both opened inquiries to put in place more consumer protections and better fraud prevention measures.