Kansas Sports Betting Regulators Shut Down DFS

Daily fantasy sports sites in the United States are currently under logistical and legal siege. At the moment, it does not seem like this increased scrutiny will abate anytime soon. And to that end, Kansas sports betting regulators have now turned their attention to the daily fantasy sports industry.

Officials in The Sunflower State have reportedly ordered DFS sites in Kansas to cease operations on an immediate and indefinite basis. This move follows a growing movement to crack down on an industry that state gambling regulators believe is teeming with companies operating as what they deem to be rogue online sportsbooks in the United States.

In Kansas’ case, this decision was not a given. Many thought that daily fantasy sports sites might be allowed to carry on. After all, online sports betting in Kansas launched roughly 18 months ago. It’s one thing for states without legal online sports betting to order the shuddering of daily fantasy activities. It’s another for places that allow online gambling to do the same.

And yet, as it turns out, the legalization of online sports betting in the United States isn’t providing enough cover for daily fantasy providers. If they aren’t operating in a legal gray area, they are conducting business without official sports betting licenses. Even though these companies pay taxes on their revenue, this functional loophole or workaround has rubbed legal gambling regulators the wrong way.

But why? And what, exactly, is happening between Kansas sports betting regulators and DFS providers as we close out February 2024?

At Least Six Daily Fantasy Sports Sites Ordered to Shut Down by Kansas Sports Betting Regulators

Those in charge of compliance with Kansas sports betting laws have officially informed daily fantasy sites they will need to leave the market. The decision will impact no fewer than six companies. Here’s Sam McQuillan of Legal Sports Report with more:

Kansas gaming regulators ordered six fantasy sports apps, including Underdog Fantasy, to leave the state over ‘illegal sports wagering.’ ‘I can confirm that we have sent out six cease-and-desist letters to date to various parties who may be in violation of Kansas law,’ Kansas Racing and Gaming Commission General Counsel Judith Taylor told LSR. An industry source confirmed to LSR that Underdog was one of the six companies to receive a cease and desist letter.”

The first of these orders were sent out all the way back in September 2023—almost six months ago. Though the letters received some attention then, attention to the matter has redoubled in recent weeks as state legislatures across the country convene for policy meetings.

Thus far, the Kansas Racing and Gaming Commission has yet to identify all of the companies to which they sent cease and desist orders. However, Underdog Fantasy has already vacated the state. And it’s reasonable to assume other daily fantasy mainstays such as Betr and Prizepicks received similar orders.

At this writing, though, PrizePicks remains operational in Kansas. Granted, this isn’t too surprising. PrizePicks has pushed back against the increased DFS scrutiny more than many other companies. Specifically, they have argued they are in full compliance with gaming laws. Of course, this hasn’t prevented them from shuddering services in states such as New York and Florida. But they do seem more inclined to ride out intensifying pressure more than others.

Why are States Cracking Down on Daily Fantasy Sports Providers?

As we noted at the top, Kansas sports betting regulators are far from the only ones taking aim at daily fantasy sports sites. Florida, New York, California and even Massachusetts, among others, are all doing the same.

Many remain taken aback by the increasing amount of cease and desist mandates, particularly among states like Kansas that allow online sports betting. However, regulators have come to believe that allowing investments in player performance statistics during real-life games constitutes sports gambling rather than fantasy play. In turn, state officials also believe DFS sites need sports betting licenses to continue operations.

Despite counter-claims from companies like PrizePicks, this interpretation of DFS events is largely holding up. PrizePicks themselves already had to pay New York $15 million in penalties for operating without a sports betting license.

Attempting to overcome cease and desist orders has even proven futile in states that actually have daily fantasy sports laws. To be sure, this isn’t true for Kansas sports betting policy. But it is the case elsewhere.

For example, sites such as PrizePicks will exit the Florida market in March 2024—even though The Sunshine State has specific DFS regulations in place. And make no mistake, this is a big deal. It means that the games and services offered by daily fantasy sports sites have graduated beyond pre-negotiated norms. And that, by extension, makes it much harder for these companies to overthrow recent claims.

Will Kansas Sports Betting Regulators Eventually Allow DFS Sites to Relaunch?

At this juncture, the answer to the above question is unclear. Technically speaking, daily fantasy sports sites can relaunch as official online Kansas sports betting sites. But that requires a handful of dominoes to fall into place.

First and foremost, the Kansas sports betting market must have room for other licensed providers. Most states allow only a select number of operators to receive them. And these maximums are usually always met as soon as states roll out online betting. Daily fantasy sports sites in Kansas may have to wait until current agreements expire before placing their own bid for a license. Well that, or they need The Sunflower State to amend how many licenses they allow.

But let’s say, in theory, DFS providers have the opportunity to get a Kansas sports betting license. There’s no guarantee they’ll be willing to pay the premiums associated with getting one. Licensing fees are expensive, and the tax rates on their revenue are steep. The cost of admission will likely scare away most daily fantasy sports operators. And in the event certain companies have the cash to fork over, they may still be hesitant to do so.

Most sports betting markets in the United States have already established a pecking order. DraftKings and FanDuel make up a majority of the country’s market share. Everyone else is basically fighting for smaller portions of business. Perhaps DFS sites are better suited to compete with more established companies because of their alternative-style wagers. But we have seen larger companies fail time and again to cement a foothold. It won’t be any easier for DFS sites if they decide to try getting Kansas sports betting licenses.

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