Indiana and Vermont became the latest states to introduce legislation aimed at regulating daily fantasy sports.
Both bills appear to be industry-friendly, as written, without onerous licensing fees, taxes and requirements for DFS operators. The legislation is part of a recent wave of interest in legalizing and regulating the industry in states around the country.
The origins of the Indiana DFS bill
The idea that a regulatory bill was coming in Indiana was not a secret, as Rep. Alan Morrison has talked openly about his desire to bring forth a regulatory bill in recent months.
Morrison has been on the fantasy sports issue for a year now. He introduced a bill last year that would have allowed the state’s racinos to offer DFS contests. That bill failed to gain any traction in the legislature in 2015.
In September, Morrison indicated that he wished to revive the bill, but at the time, a regulatory approach was not in the plans:
“We are not looking to regulate them [DFS operators] at all, that’s not what we want to do,” Morrison said.
That comment came just before the increased governmental and media scrutiny of the DFS industry that developed in October.
Inside the Indiana DFS bills
The Indiana bill — HB 1168 (tracking and text here) — is in many ways like the one introduced in Illinois in October. The bill has been referred to the Committee on Public Policy. An identical Senate version — SB 339 — was authored by Sens. Jon Ford and Ron Alting.
The bill creates a new chapter in Indiana state code: IC 4-31-14. It does does several things:
- It “authorizes paid fantasy sports games” under state law.
- It says that paid fantasy sports contests are not “gambling” under state law, if they meet the provisions in the bill.
- It licenses DFS operators — and allows for operators to parting with licensed gaming facilities in the state. Operators must pay a licensing fee.
- It creates the “Paid Fantasy Sports Division of the Horse Racing Commission.”
“At first glance, it looks really positive for the industry, it clarifies that it is legal has basic consumer protections, so we’re pretty positive about the bill,” FSTA Chairman Peter Schoenke told Legal Sports Report. “And we’ll also work with them to improve it, and hopefully get it passed.”
The bill also creates a tax on wagering on “advance deposit wagering” related to horse racing.
Defining fantasy contests
The bill defines a “paid fantasy sports game” be appropriating the language from the Unlawful Internet Gambling Enforcement Act. That includes the provision that a fantasy contest is covered if “all winning outcomes reflect the relative knowledge and skill of the game participants. (As we’ve pointed out before, there are possible issues with that practice.)
What the “Paid Fantasy Sports Division” can do
The new part of the Horse Racing Commission is given several tasks, mostly related to consumer protection as it relates to fantasy contests:
- “Investigate and reinvestigate applicants, game operators, and licensees.”
- Take a look into alleged violations.
- Issue subpoenas and take testimony under oath in accordance with overseeing licensed operators.
- Levy fines for violations.
How sites can operate in Indiana
Licensed operators have two choices:
- They can operate via a website, pretty much like they do now.
- They can contract with a licensee to offer fantasy contests via an existing gaming facility.
Fees for DFS
Operators must pay $5,000 annually to be licensed in Indiana. Money will be used by the new division to administer the measures in the bill.
This is a measure that will make it possible for most small operators — i.e. not DraftKings and FanDuel — to serve the state.
Fantasy “entry fees” are exempted from taxes on gaming and wagering in the state code.
The bill provides for the following measures aimed at providing consumer protections:
- Sites must verify “the identity and age of patrons.”
- A minimum age of 18 is established for players.
- Fantasy site employees and relatives of employees are not allowed to play in contests if the prize is more than $5.
- Sites must take steps to ensure the security of a player’s confidential information and funds, and also segregate funds.
- Sites must take steps to ensure that “confidential information” that would be useful in playing in fantasy contests is protected.
- Institute responsible gaming measures like being able to self-exclude.
- Sites must undergo an audit by a certified public accountant annually.
The Vermont DFS bill
On Thursday, a new bill also surfaced in Vermont; unlike Indiana, there had been no rumblings of a regulatory effort in that state.
In Vermont, S. 223 has been introduced by Sen. Kevin Mullin and has been referred to committee. It adds a new chapter to Vermont code to define and deal with fantasy sports contests in the state.
At least some operators have stayed out of the state due to legal concerns.
The bill is also similar to other regulatory approaches coming forward in other states; in the summary, it proposes “to regulate fantasy sports contests and establish consumer protections for fantasy sports players.”
There is no licensing fee or taxation in the bill.
Fantasy contest definition
Again, UIGEA is the basis of defining what falls under the definition of a “fantasy sports contest,” although the Vermont bill offers its own spin. Part of the definition says a contest exists whenever a “fantasy sports player uses his or her knowledge and skill of sports data, performance, and statistics to create and manage a fantasy sports team.” This is different from definitions put forth in other states.
The bill also exempts fantasy contests from state law pertaining to gambling and lotteries.
Protections put forth mirror those in other states. Sites must:
- Stop employees, relatives of employees, and athletes from taking part in contests.
- Protect information that could be used to help someone gain an edge in fantasy contests.
- Establish a minimum age of 18 for users.
- Allow players to self-exclude themselves.
- Segregate player funds from operational funds.
- Conduct an annual third-party audit.
Sites are subject to fines for violations of the code.