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Daily fantasy sports sites aim to make Nevada comeback
draft kings

LAS VEGAS — Daily fantasy sports websites are trying to get legal after a series of state-level setbacks that shut them down in some parts of the country, but officials who set policy in the gambling mecca of Nevada indicated they won't be bending too far backward for the companies.

Fan Duel and Draft Kings proposed a new category of regulation and license fees that would help Nevada — an economically small but symbolically important state — join 41 other states where the practice is up and running. Nevada determined last fall that daily fantasy sports sites qualified as gambling and needed to shut down if they didn't have a license.

But casino heavy-hitters on Nevada's Gaming Policy Committee expressed disappointment Tuesday with the low penalties and lack of criminal background checks in the companies' proposal, saying it was weaker than laws passed in other states and didn't measure up to Nevada's rigorous gambling regulation.

"You don't know your audience," said Nevada Gaming Commission Chairman Tony Alamo. "Nevada is the gold standard ... there's just not an appetite for 'regulation light' or 'regulation not at all.'"

Daily fantasy sports sites flooded the airwaves with TV commercials last fall, offering players quick payouts based on the performance of real-life athletes assembled into "fantasy" teams. The companies disputed that the activity was gambling, arguing that they offered games of skill and were exempt under a fantasy sports clause in the 2006 Unlawful Internet Gambling Enforcement Act.

Nevada regulators countered that site executives sometimes used the term "betting" to describe their own product and needed casino licenses. DraftKings and FanDuel also ceased operations in states such as Illinois and New York, but have since passed laws in eight states and introduced bills in dozens more to regulate the activity.

"That's the conundrum that faces innovative products," said lawyer Scott Ward, who represents Fan Duel and Draft Kings. "They outstrip the current law or current regulatory framework."

New York, a huge market for the sites, cleared five companies Monday to operate under a new state law that requires operators pay a $50,000 annual fee and a 15 percent tax on revenue.

The proposal presented to Nevada officials on Tuesday calls for a $10,000 annual licensing fee for larger operators and would require owners with at least a 15 percent stake in a company to identify themselves to the state.

Members of the committee said they were disappointed that the five-page proposal was so short and excluded background checks — an important step for the Nevada casino industry that's worked for decades to shed associations to organized crime. They also questioned whether daily fantasy sports would bring jobs and revenue to the state after hearing that the proposed licensing fees would yield an estimated $30,000 a year statewide — far from enough to cover the cost of regulating the companies.

Ward said Fan Duel and Draft Kings think many of the regulations that apply to casinos shouldn't apply to them, but said they were willing to work with Nevada on a more agreeable proposal because of the state's outsized place in gaming regulation debates.

"That's why we're here in Nevada — because of your strong history in these areas," he said. "Other states look to you."