Tennessee became the third state to regulate the daily fantasy sports industry when Gov. Bill Haslam signed a bill into law on Wednesday.
Tennessee joins Indiana and Virginia as state governments that have passed regulations overseeing DFS this year. Massachusetts Attorney General Maura Healey also enacted DFS regulations this year.
The backstory of DFS in Tennessee
Tennessee becomes the first state where a negative attorney opinion about the legality of daily fantasy sports was rendered moot by the legislature. AG Herbert Slatery earlier this month opined that operating DFS contests constituted illegal gambling under Tennessee law, previously.
Neither DraftKings nor FanDuel had announced that it would be leaving the state in the wake of that opinion.
Last week, the legislature voted overwhelmingly to approve the bill that formally legalizes and regulates DFS in Tennesseee. The Senate passed the bill 27-2, while the House approved the measure by a vote of 67-17. Given those majorities, the idea that the bill would become a law seemed like a matter of “when,” not “if.”
What’s next in Tennessee for DFS?
The bill is scheduled to take effect on July 1; daily fantasy sports sites appear to have until that date to decide whether they want to be licensed in the state.
The laws passed in Indiana and Virginia were friendly to DraftKings and FanDuel, but not necessarily the rest of the industry, because of $50,000 licensing fees included in those bills.
Tennessee has the chance to be much more friendly in terms of allowing smaller operators into the state. The law, as written, charges a 6% tax on revenue generated by Tennessee residents (the equation for that is entry fees minus prizes awarded equals revenue).
Oversight of the DFS industry is given to the Secretary of State, and that office will be in charge of implementing the law. The Secretary of State is given the power to “establish appropriate fees for application and license renewal, and other applicable fees.” The amounts of those fees are not prescribed by the legislation, however.
More on the other provisions of the bill here; or read the actual bill language here.
The South is a DFS epicenter
While the DFS industry faces battlegrounds throughout the country — both from attorneys general and legislatively, the South is one of the hotbeds of activity in 2016. Aside from Tennessee:
- Mississippi’s attorney general opined that DFS is illegal gambling; a bill is expected to be signed by the governor there this week.
- Alabama’s AG sent cease-and-desist letters to DraftKings and FanDuel; a bill’s prospects of becoming law seem long at this point.
- Georgia’s AG said DFS was illegal there, and a bill was scuttled almost immediately afterwards.
- Florida — a state where DFS could face legal issues — failed to pass a bill during the legislative session.
Several other states, outside of the South, could pass DFS regulation in the near future.
Industry reaction
DraftKings offered this statement:
Today, Tennessee became yet another state to enact a regulatory framework that allows residents to continue playing the games they love. We thank Governor Haslam for his leadership and the members of the legislature, especially Representative Pat Marsh and Senator Jack Johnson, who provided tireless guidance on this important issue. We will continue to work with legislators in other states across the country to implement appropriate consumer protections for our fans.
FanDuel offered a press release that included this statement from Cory Fox, counsel for policy and government affairs:
“More than one million fantasy players in Tennessee now know that their right to play fantasy sports is safeguarded and that smart consumer regulations are in place to protect them on all fantasy sites operating in the state. Tennessee’s elected leaders — Governor Haslam and the members of the legislature, in particular bill sponsors Senator Jack Johnson and Representative Pat Marsh — took a detailed and careful approach to this issue, and delivered a real solution for the state.”
