FanDuel, a well-known online gambling platform, has recently decided to relinquish its license to operate in Nevada.
This decision followed a clear stance from Nevada's gaming regulators, who stated they would not permit participation in prediction markets for sports or entertainment events.
Although these markets might be legally regulated at the federal level, they are classified as illegal betting under Nevada law. Consequently, FanDuel's parent company, Flutter, and its competitor DraftKings, have both withdrawn from the state to comply with legal requirements.
This news follows closely on the heels of the announcement outlining the operation of the prediction market collaboration between FanDuel and CME Group. And the company just announced that it's bolstering jackpots for players who use FanDuel Casino.
Why Nevada Prohibits Prediction Markets
The move comes just weeks after the Nevada Gaming Control Board (NGCB) sent a message to licensed gambling operations, like Flutter Entertainment, about the importance of complying with Nevada’s strict gambling laws.
The NGCB's notice, titled “Sports Event Contracts Are Wagers,” underscored that such contracts are deemed wagering under state law — “whether the contract is listed on an exchange regulated by the Commodity Futures Trading Commission (CFTC) or elsewhere.”
NRS 463.0193 defines a sports pool as “the business of accepting wagers on sporting events or other events by any system or method of wagering”.
State Objections Explained
Nevada's stringent gambling laws oppose prediction markets for several reasons:
Classified as Gambling: The Nevada Gaming Control Board equates betting on outcomes of events such as sports games, entertainment awards, or elections with traditional gambling, akin to casino betting. This classification holds even if federal agencies like the Commodity Futures Trading Commission regulate these markets.
State Control: Nevada insists all gambling should occur through its licensed operators to ensure oversight, consumer protection, and fair gambling practices. Currently, prediction markets do not fit within this framework and are viewed as bypassing state regulations.
Lack of Regulation: Prediction market operators do not adhere to Nevada's strict regulations concerning customer protection and tax obligations, rendering them "unregulated gambling."
Risk to Casinos: Nevada has warned that casinos engaging in these markets—directly or indirectly—may face penalties or license suspension within the state.
Federal vs. State Law: Despite some operators' belief in federal law protection, Nevada maintains that state laws apply to gambling activities, including events perceived as federally regulated.
Prohibited Betting Events in Nevada
- Sports games (e.g., World Series of Poker)
- Entertainment awards (e.g., the Oscars)
- Esports competitions
- Political elections
Nevada insists that its casinos avoid these betting activities, regardless of their legality elsewhere. The state is firm on enforcing its laws to ensure fair and regulated gaming.
Regulatory Environment in Nevada
Nevada has tightened restrictions on prediction markets, cautioning licensed companies to steer clear or risk losing their operating license. This firm stance illustrates Nevada's commitment to its gambling regulations.
FanDuel's withdrawal establishes a critical precedent, signaling Nevada's dedication to upholding its laws, even concerning activities not directly conducted within the state. Similar warnings from Arizona, Ohio, and Michigan suggest Nevada's position may influence decisions in other states.
The Michigan Gaming Control Board (MGCB) launched a similar investigation in April into unlicensed sports prediction markets operating within the Wolverine State.
Future of FanDuel
Going forward, FanDuel will focus its prediction market activities in states where online sports betting is not allowed and where it does not have a regulated sportsbook license.
While hoping for a future return to Nevada if regulations change, FanDuel currently plans to cease operations in the state. This situation underscores the complex interaction between state laws and federal regulations in the gaming industry.
