The Nevada Gaming Control Board (NGCB) accepted the surrender of DraftKings and FanDuel license applications on Wednesday. Both businesses are abandoning plans to enter the Nevada sports betting market as they pursue launching prediction market products.
Key Takeaways
- FanDuel and DraftKings were pursuing sports betting licenses in Nevada.
- Nevada believes prediction markets to be illegal.
- Both FanDuel and DraftKings intend to launch prediction market products.
In Wednesday’s notice to Nevada’s licensees, chairman Mike Dreitzer wrote that the NGBC had “accepted the surrender of Flutter Entertainment PLC's Order of Registration, as well as all related licenses and approvals including those for FanDuel Sportsbooks and its license as a provider of an information service, and granted administrative approval of requests for withdrawal for all active and pending applications.”
FanDuel and DraftKings were late pursuing Nevada sports betting licenses. Their strategy, instead, was to prioritize newly legalizing jurisdictions. In the meantime, prediction markets started to offer sporting event contracts.
Although federally regulated, prediction markets are unlicensed and unregulated by the states. They also do not pay state taxes. As a result, many states, including Nevada, consider prediction market sports contracts to be illegal.
In March, Nevada issued a cease-and-desist order to Kalshi, a prediction market operator. Kalshi then sued Nevada. The two are still embroiled in a legal battle over the legality of the prediction market operator to offer sports contracts in the state.
DraftKings, FanDuel launching prediction markets despite warning
Last month, Nevada issued a warning to its licensees, warning them that if they participated in prediction markets, they could lose their licenses. Apparently, that threat didn’t dissuade DraftKings or FanDuel.
Last week, DraftKings announced plans to launch prediction market sports contracts “in the coming months” to states that currently do not offer legal sports betting. DraftKings acquired CFTC-regulated Railbird Exchange in October to facilitate its new business.
FanDuel announced Thursday it would start offering prediction market sports contracts later this year. FanDuel partnered with the CME Group in August to launch their prediction market products. Per a footnote in their latest earnings report, FanDuel’s parent company Flutter disclosed it would be splitting its prediction market gross revenues with the CME Group.
Wednesday’s NGCB notice acknowledged DraftKings and FanDuel’s plans to enter prediction markets.
“It has been made clear to the Board that Flutter Entertainment/FanDuel and DraftKings intend to engage in unlawful activities related to sports event contracts,” reads the notice. “This conduct is incompatible with their ability to participate in Nevada's gaming industry.”
Since DraftKings and FanDuel were not operating in Nevada, they aren’t giving up sports betting market share in the state. They do, however, run the risk of legal action from Nevada – and/or other states – over the legality of sports-oriented prediction markets.
