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Investigations into fantasy sports contests widen

Sports bettors watched games and races at Wynn Las Vegas.
Sports bettors watched games and races at Wynn Las Vegas. Isaac Brekken/AP/File/Associated Press

Another state on Friday indicated its regulators believe fantasy sports contests such as those run by Boston-based DraftKings are illegal gambling operations, as pressure from federal investigators increased on the fast-growing, online industry.

The Illinois Gaming Board told the Associated Press it believes DraftKings and FanDuel are probably illegal in that state. Illinois law considers games of “chance or skill for money or other thing of value” to be gambling, and regulators plan to ask the state’s attorney general for legal advice.

The Illinois development followed a ruling by the state of Nevada on Thursday that DraftKings Inc. and its New York-based rival FanDuel Inc. were essentially gambling operations that need a license to operate there. The companies suspended operations in the state immediately following the board’s ruling.

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Also Friday, the federal prosecutor in Tampa who is investigating the industry issued a subpoena to the Fantasy Sports Trade Association, The Wall Street Journal reported late Friday.

DraftKings did not comment Friday on its latest setbacks. On Thursday, both DraftKings and FanDuel issued testy statements suggesting regulators in Nevada were acting only to protect that state’s lucrative gaming industry.

But, in an interview with the Globe, Nevada’s top gambling official said his state banned daily fantasy sports contests because they were obviously a form of gambling that needed to be regulated — not, as DraftKings has suggested, because of pressure from the casino industry.

“It’s just kind of funny,” A.G. Burnett, chairman of the gaming board, responded to the companies’ accusations. “We really don’t do things at the behest of casinos. Often times, they’re just as angry at us as the daily fantasy guys are right now, because we’re strict regulators and enforcers.”

Burnett also said the companies’ claims that they are not in the gambling business because they run games of skill, not chance, is irrelevant under Nevada law, which considers any wagering on sports pools to be a form of betting that requires a state permit.

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“They’re in the business of accepting wagers on the outcome of a day’s events,” Burnett said flatly. “This is gambling.”

“This is gambling,” said Nevada Gaming Control Board Chairman A.G. Burnett.
“This is gambling,” said Nevada Gaming Control Board Chairman A.G. Burnett.Cathleen Allison/AP/File/Associated Press

Nevada brings to six the number of states where daily fantasy games for money are prohibited or need to be licensed. Meantime, legal analysts have been warning of a potential problem in Florida, where several of the smaller companies that provide daily fantasy sports games have withdrawn in recent months because of concerns that state’s law may also outlaw the contests.

Federal investigators in Boston have also opened a probe of DraftKings, as has the attorney general of New York. Massachusetts Attorney General Maura Healey said she is conducting “on-going conversations” with the two companies to ensure they have “strong consumer protections in place.”

The mounting pressure follows allegations that company employees had improper access to statistics and other insider information that could have given them an unfair advantage over ordinary players.

Burnett acknowledged those revelations weighed on Nevada regulators. Without bringing fantasy games under Nevada’s regulatory scheme — which requires that gambling operators be found “suitable” — the board would have no authority to protect Nevada consumers who lost money playing unfair contests, he argued.

“I’d hate it if a citizen of Nevada was being harmed and turned to the board, but we had no answer,” he said. “The foremost reason for licensure is to make sure people offering things to Nevada citizens are suitable, so if there’s a problem, we as regulators have the ability to look into the problem and make the patron whole.”

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Amid the legal uncertainty, casinos have largely stayed away from daily fantasy contests, not knowing whether introducing such games or even partnering with companies like DraftKings would be permitted under the conditions of their state gambling licenses. Instead, they have watched with growing frustration from the sidelines as the games exploded into a multibillion dollar, largely unregulated industry.

Some casino executives have lashed out at daily fantasy operators.

The American Gaming Association issued a statement welcoming Nevada’s ruling on daily fantasy sports. Chris Moyer, the association’s director of media relations, said the group has been pushing attorneys general in other states to provide similar clarity.

“The ambiguity has certainly been a little frustrating,” Moyer said in an interview. “It’s clearly an exciting popular product that millions of people enjoy.”

After Thursday’s ruling by Nevada, DraftKings insinuated that casinos bullied regulators there into cracking down on daily fantasy sports. “We understand that the gaming industry is important to Nevada and, for that reason, they are taking this exclusionary approach against the increasingly popular fantasy sports industry,” the company said in a statement.

But Burnett said Nevada casino operators have asked whether they can partner with daily fantasy sports companies or advertise their products, but did not lobby the board to shut down the sites.

One longtime gambling analyst said that while casinos have some sway with regulators, longtime operators know better than to mount a full-scale campaign aimed at influencing Nevada’s gambling board.

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“Casinos pull a lot of weight, but it’s mostly passive,” said William Thompson, professor emeritus at the University of Nevada Las Vegas. “I’m sure the board got clues that this decision would be supported, but I doubt there was any outward lobbying.”

Daily fantasy companies have argued they are exempt from a federal law limiting online gambling because their products are games of skill, not chance. But Thompson took a dim view of that distinction.

“I don’t buy that at all. We regulate other sports betting, so why not fantasy?” he said. “People recognize the skill in poker, but it’s still gambling.”

Burnett acknowledged that he has received angry responses to the board’s decision from Nevada players of daily fantasy sports contests. He said he was e-mailed an expletive-laced tirade from one player who complained that his life had been ruined and that he now had nothing to do.

“It’s kind of sad,” Burnett said. “We’ve got lots of lakes and mountains and rivers and stuff to do.”


Dan Adams can be reached at dadams@globe.com. Follow him on Twitter @DanielAdams86.