Georgia joins states scrutinizing daily fantasy sports companies

Nevada board: DFS is gambling, needs license (1:45)

ESPN gambling writer David Purdum discusses the impact the ruling by the Nevada Gaming Control Board could have on the future of daily fantasy sports. (1:45)

ATLANTA -- Daily fantasy sports sites have come under scrutiny in another state, with Georgia regulators questioning two major industry players, as officials in Nevada and elsewhere have done.

In Georgia, officials are questioning whether FanDuel and DraftKings can operate at all under the state's tight gambling restrictions. Georgia's constitution bans gambling except for state lottery-run games, according to a Sept. 23 letter written by the lottery's General Counsel Joseph Kim and sent to the companies' CEOs.

Kim told The Associated Press on Monday that neither company responded by the Oct. 16 deadline given in his letter. He said lottery officials are considering their next step.

States with more flexible gambling laws than Georgia's have also questioned the fantasy sports model. Nevada ordered both companies out of the state unless they get gambling licenses.

The standoff is being closely watched by regulators in Delaware, where parlay bets on NFL games are allowed. Regulators in Illinois, Michigan and Mississippi, as well as lawmakers in California, Pennsylvania and Ohio, have previously discussed plans to review the issue.

The companies argue that fantasy sports are not gambling but a game of skill, which exempts them from an online gambling prohibition by a 2006 federal law.

Griffin Finan, director of public affairs for DraftKings, said the company had not received any letter from Georgia's lottery.

"We are seeing a number of state regulators and other authorities taking a reasoned and measured approach to the daily fantasy sports business and hope that trend continues, along with due consideration for the interests of sports fans across the country who love to play these games," Finan said in a statement.

Representatives for FanDuel didn't respond to an email requesting comment.

Kim said in his letter that federal law doesn't protect the companies in Georgia, where the definition of a "bet" includes winning or losing something of value -- even if a game requires some skill. Only coin-operated machines are exempt from that definition, he said.

"Based on these definitions, a person or party that places or facilitates a `bet' or maintains a `gambling place' commits the crimes of gambling, commercial gambling, advertising commercial gambling and communication gambling information," he wrote.

Scrutiny of the companies increased after it was revealed that employees played on competing sites, which prompted customer fears that they could gain an advantage from insider information. On Monday, a law firm hired by DraftKings to investigate claims that an employee used inside information to win a $350,000 prize on a competing site said that didn't happen.

Players on the sites pay an entry fee to compete for cash prizes in games involving college or professional sports. Participants select players whose real-life performances generate points.