Note: The Nevada Gaming Policy Committee is meeting today, March 7, 2016, to discuss daily fantasy sports. A representative from the Culinary Workers Union Local 226 made the following statement during the public comment portion of the meeting.
First, we would like to applaud Governor Sandoval for convening the Gaming Policy Committee so we as a state can begin to address the difficult issues surrounding daily fantasy sports head on. Nevada has always been the gold standard of regulation in the gaming industry, so it is fitting that we are taking the lead in daily fantasy sports regulation.
At the same time, we should not lose sight of the fact that daily fantasy sports is gambling, which means its operators must be licensed to do business in Nevada and the business has been declared illegal in several other states. Given this state of affairs, we are deeply troubled that owners of a licensed Nevada gaming company have had a business relationship with one of the major DFS operators over the past year.
In February 2015, the UFC entered into a partnership agreement with daily fantasy sports operator DraftKings.[i] The UFC is majority owned by Stations Casinos owners Lorenzo and Frank Fertitta. This business relationship between the UFC and DraftKings continued in spite of the Gaming Control Board’s October 2015 notice to licensees urging them to “exercise discretion” in relation to daily fantasy sports.[ii]
Public scrutiny surrounding daily fantasy sports sites intensified in October, 2015 when a DraftKings employee won $350,000 by finishing second in an NFL contest on rival site Fan Duel. While the employee was eventually cleared of any wrongdoing,[iii] the appearance of impropriety in the contests led many states, such as New York[iv] and Illinois[v], to investigate and eventually ban daily fantasy sports.
Until December last year, DraftKings was a major sponsor that was featured prominently on the UFC website and at UFC events, including some that took place at major Nevada gaming licensees on the Strip.[vi] On the UFC website, the promotion has offered “DraftKings Fantasy Facts” featuring UFC fighters before events, with the most recent on Dec. 11, 2015.[vii]
While it appears that the partnership between the UFC and DraftKings may have ended in December of 2015,[viii] we believe that our regulators should still look into this relationship to ensure that the UFC has not been, are not, and will not be associated with illegal and/or unlicensed gaming operators such as daily fantasy sports companies.
In 2011, Fertitta Interactive was a division of Fertitta Entertainment, the parent company of Station Casinos. They made sure that its business relationship with Full Tilt Poker, an online poker company, was, in the company’s words, “contingent upon federal legalization of online poker.” This was a prudent and responsible way for Fertitta Interactive to conduct itself as a division of Fertitta Entertainment. That this was the right approach was confirmed when the owners of Full Tilt were later charged with bank fraud, money laundering and operating illegal gambling businesses by the Department of Justice.[ix]
Did the UFC take the same approach when it signed a deal with DraftKings? Why or why not? Did the UFC conduct appropriate due diligence when it signed its agreement with DraftKings? Why did it not immediately terminate its relationship with DraftKings after the warning issued by the Gaming Control Board to Nevada licensees last October?
In addition, as we take the first step today toward coming up with a regulatory framework for DFS in Nevada, we should also investigate this year-long relationship to ensure there were no conflicts of interests.
Specifically, we ask you to investigate what type of information was shared between the UFC and DraftKings during their business relationship. Did any UFC or DraftKings employees win large pots in UFC contests during the partnership? What type of safeguards did the UFC and DraftKings put in place, if any, to prevent employees from accessing insider information that could lead to an unfair advantage?
Again, we applaud the Governor for convening this meeting and we urge you to fully investigate this relationship between an unlicensed and illegal online gambling company and the UFC to ensure that Nevada remains the gold standard of gaming regulation.
[i] UFC, “DraftKings Becomes the Official Daily Fantasy Sports Partner of the UFC,” Feb. 25, 2015, http://www.ufc.com/news/DraftKings-Becomes-the-Official-Daily-Fantasy-Sports-Partner-of-the-UFC?utm_campaign=UFC&utm_medium=social&utm_source=sprout&utm_content=1424896602
[ii] “Legality of Offering Daily Fantasy Sports in Nevada,” Oct. 15, 2015 http://gaming.nv.gov/modules/showdocument.aspx?documentid=10481 and “Legality of Daily Fantasy Sports Under Nevada Law,” Oct. 16, 2015 http://gaming.nv.gov/modules/showdocument.aspx?documentid=10487
[iii] Rovell, Darren & David Purdum, “N.Y. AG declares DraftKings, FanDuel are illegal gambling, not fantasy,” ESPN, Nov. 11, 2015, http://espn.go.com/chalk/story/_/id/14100780/new-york-attorney-general-declares-daily-fantasy-sports-gambling
[iv] “New York Sues to Get DraftKings, FanDuel to Return Money,” NBC News, Jan.1, 2016, http://www.nbcnews.com/news/us-news/new-york-sues-get-draftkings-fanduel-return-money-n489021
[v] Duara, Nigel, “States crack down on fantasy sports, calling them games of chance, not skill,” Los Angeles Times, Jan. 2, 2016, http://www.latimes.com/nation/la-na-ff-fantasy-sports-bans-20160102-story.html
[vi] See attached screenshots from UFC 191 and UFC 194
[viii] Gouker, Dustin, “DraftKings, UFC Deal For Daily Fantasy MMA Is Over — At Least For Now,” Legal Sports Report, Feb. 16, 2016, http://www.legalsportsreport.com/8255/draftkings-ufc-deal-over-for-now/
[ix] Stutz, Howard, “Internet poker companies shut down, charged with fraud,” Las Vegas Review Journal, Apr. 15, 2011, http://www.reviewjournal.com/news/crime-courts/internet-poker-companies-shut-down-charged-fraud