Daily fantasy sports websites have been ordered to shut down immediately in Nevada, the latest blow to a growing industry after reports that its employees won large sums of money thanks to "insider" playing.
The Nevada Gaming Control Board issued the order Thursday, determining that websites like DraftKings and FanDuel, Inc. should be considered gambling and "must cease and desist" until they obtain a state gaming license.
The decision came a day after the Wall Street Journal and The New York Times reported the FBI has opened a probe into the two largest providers of daily fantasy sports.
According to the reports, agents from the FBI's Boston office are looking into whether the business model for the websites is legal.
A spokeswoman for the FBI's Boston office told BuzzFeed News the agency could not confirm or deny the existence of the investigation.
FanDuel officials told BuzzFeed News the company was "terribly disappointed" in the agency's decision and were "examining all options" to bring their services back to Nevada, but were halting all operations because of the order.
"This decision stymies innovation and ignores the fact that fantasy sports is a skill-based entertainment product loved and played by millions of fans," the company said in a statement to BuzzFeed News.
The FanDuel spokesperson declined to comment on the reported FBI investigation.
On Friday, the Nevada Attorney General released a memo on the legality of the sites at the request of the gaming control board.
The AG concluded that "daily fantasy sports constitute sports pools and gambling games. They may also constitute lotteries, depending on the test applied by the Nevada Supreme Court. As a result, pay-to-play daily fantasy sports cannot be offered in Nevada without licensure."
Some of the evidence cited in the AG's review is a Reddit AMA held by DraftKings co-founder Jason Robbins.
In the AMA, held three years ago, Robbins "stated that the concept for DraftKings.com was 'almost identical to a casino.,'" the AG wrote.
Fantasy sports, in particular daily fantasy sports, has grown immensely in popularity recently, with commercials for companies advertising the services in cable news channels and sports games.
Under their model, players pay an entry fee and draft real sports figures into fantasy teams, with the best performing teams potentially winning large amounts of money. On Thursday, the Nevada's gaming commission ruled that met their definition of gambling.
The industry has faced particularly scrutiny in recent days, especially after the New York Attorney General sent letters to DraftKings and FanDuel informing them of an open inquiry into the companies.
DraftKings is based in Boston, and FanDuel, Inc. is based in New York.
According to the letter, the Attorney General was looking into claims that employees of the company might have "gained an unfair, financial advantage" by exploiting and getting early access to data.
That investigation came after an employee of DraftKings released sensitive data that would affect the outcome of the fantasy games. The employee had also won $350,000 by playing in the competing site FanDuel.
Last week, DraftKings also released a statement that a new company policy prohibited employees from participating in fantasy games for money.
In its Thursday notice, the Nevada Gaming Control Board said a months-long probe into daily fantasy sports found that it "meets the definition of a game or gambling game," which meant it needs a license to operate in Nevada.
The American Gaming Association, which represents the U.S. casino industry, issued a statement Thursday afternoon in support to the board's decision.
"The casino gaming industry has repeatedly called for greater legal clarity on daily fantasy sports," AGA President Geoff Freeman said in a statement. "We will continue to seek additional clarity in other jurisdictions, as eliminating ambiguity is in the best interest of all parties, and consumers."
Businesses with gaming licenses can bring daily fantasy sports to the state, but the agency warned they should "exercise discretion" if they decide to work with companies that don't have licenses in Nevada.
