Nevada has approved the first fantasy sports operator in the state. This is happy news for fantasy sports enthusiasts. An increasing number of US states have created regulatory structures for fantasy sports and the developments in Nevada are being watched closely by operators looking for a stable legal environment.
The approval in Nevada was provided to a company headed by Vic Salerno, a gaming pioneer who created Leroy’s kiosks, which was taken over by William Hill. Salerno is proposing a pari-mutuel system for fantasy sports, an innovative idea that shows how the mainstream DFS model is only one way daily fantasy sports might be played.
There are a few things that DFS companies such as DraftKings and FanDuel do terribly. One aspect they fail on is game design. Their games are designed so that the operator sets a price for each player that can be drafted by contestants. The problem with this system is the “house” needs to set a price. At a fundamental level, this creates a problem since using only one voice is never the best way to determine a fair price. An open market system is much better placed to make a determination of value because a market represents the weighted voices of all participants. This is what Salerno is attempting to do with his proposed game in Nevada. His idea is to set player prices using a pari-mutuel pool.
If the DFS operator sets rules such as how many points for each statistical measure (such as goals, assists, etc), but allows the pari-mutuel pool to set the price, the operator doesn’t need to arbitrarily set a price for each player. Instead, it will be up to the participants themselves, through their bets, to set player prices.
The outcome of the system proposed by Salerno will be more transparent for players, easier to manage for the operator (since the operator no longer needs to handicap), and will dramatically reduce the conflicts of interest inherent in the current price fixing DFS method used by DraftKings and Fan Duel.
The application in Nevada also highlights how nascent the DFS industry is. We have only scratched the surface in terms of game design and player experience. The DFS industry kind of got used to the methods used by DraftKings and Fan Duel and because of the regulatory uncertainty, there hasn’t been a lot of innovation. But as more jurisdictions open DFS to legal operators, we will hopefully see more innovation. I think this is something that regulators should pay attention to. If they make their regulatory system too rigid, it will discourage new innovation, but if regulators create environments where different concepts of DFS can exist, new game designs and a better player experience will prevail.
CARSON CITY – State gaming regulators gave approval Thursday to a proposal from long-time Las Vegas gaming veteran Vic Salerno that is expected to lead to the return of daily fantasy sports betting in Nevada as early as August.