The Nevada Gaming Commission Thursday told the With the chairman of Flutter Entertainment that licensees must comply with state laws regulating sports-events contracts or risk violated their gaming licenses.
The warning and discussion prompted by Brian Krolicki and echoed by his colleagues came as the Commission unanimously approved the license of John Bryant, director and chairman of the board of Flutter, the online sports betting company that does business in the U.S. as FanDuel.
In August, FanDuel announced that it’s teaming up with CME Group, the largest U.S. derivatives exchange, to offer bets on stocks, commodity prices, and inflation. It’s expected to launch later this year and hasn’t ruled out offering sports-related wagers in the future.
While attending an International Association of Gaming Regulators meeting in Toronto Thursday, Krolicki said prediction markets were part of the agenda, due to their proliferation. DraftKings announced a deal this week to acquire prediction-platform Railbird.
“We’ve spent days talking about accountability, licensing, know-your-customer issues, problem gambling, and geolocating. All of these things to my understanding the prediction markets disregard, because they’re not licenses of the states that think these things are important,” Krolicki said.
Flutter’s private counsel Erica Okerberg told Krolicki that the operator is being thoughtful about its partnership with CME and will keep regulators apprised as it moves through the process.
“One of the reasons the company chose the CME Group is because it’s a longstanding company with a track record of compliance and consumer protection,” Okerberg said. “The company believes that responsible-gaming measures are very important on the sports betting and igaming side. It plans consumer protections, reviewing and understanding customers, and other measures, including geofencing and separating by state as it moves through this joint venture.”
Bryant said compliance is important and that their relationships with state regulators are important to them.
“You’re in a crucible that’s impossible going forward,” Krolicki said. “You’re all trying to do it right, but the conflict arising from shareholders and regulators is profound. It’s difficult to hedge for the future versus staying regulated.”
Chicago-based CME is registered with the Commodity Futures Trading Commission, much like Kalshi, which began launching sports contracts earlier this year and is locked in a legal battle with Nevada gaming regulators after it received a cease-and-desist order from operating in the state. Kalshi sued the Gaming Control Board, arguing its operations fall under the federally regulated Commodity Exchange Act when it began offering sporting-event contracts in January.
“Prediction markets (are) unlawful,” Krolicki said. “Nevada is famous for our slogan, ‘What Happens in Nevada Stays in Nevada.’ Per the conversations I had in Toronto with regulatory bodies on this planet, they will note what happens here in Nevada with any of our licensees who feel so compelled for shareholder pressure or corporate survival. It’s so unfair that some companies are litigating us, and not just the Gaming Commission and Gaming Control Board, but also we as individuals.”
Krolicki said he will leave it to the courts to figure it out, in addition to state lawmakers and perhaps Congress.
“Going forward, it’s uncertain how the prediction markets will fare,” Krolicki said. “There’s a lot of speculation to build billions of dollars of market cap when the foundation is in violation of just about every state I’m aware of, including Nevada.”
Krolicki referenced a directive issued last week by the Gaming Control Board, warning licensees about prediction markets. He urged all industry members to know the content.
“I appreciate your comments,” Bryant said. “I can assure you we’re working hard with the CME to ensure we’re compliant with the laws and regulations everywhere. The CME Group has been around a long time and we’re both gold standards in our respective industries. We want to make sure what we do is right. The issues you raised have been discussed at the Board level. We’re taking our state regulators very seriously and taking our time to get this as right as we can. More clarity in this space would be good for everybody and I would love to see that clarity come our way.”
Okerberg said they’re aware of the Board’s guidance and are committed to continuing dialogue with the regulators.
“You may find yourself in an untenable position between regulators and shareholders,” Krolicki said. “I hope that’s not the case and it’s why clarity would behoove all players here. These prediction markets have become so big so fast and well capitalized that (the thought is they are) too big to fail. I disagree with that. Until the courts give this Commissioner or Nevada gaming regulatory structure, we’re compelled to uphold as we see fit those we license and regulate. It’s for the folks we regulate and those who visit everyday whether brick-and-mortar or online. Those safeguards are profoundly important, and I hope those who make the decisions as to how this business might or might not move forward take all of those aspects into consideration.”
