Budget Amendment ID: FY2019-S4-870-R2
2nd Redraft ECO 870
Daily Fantasy Sports
Mr. Crighton moved that the proposed new text be amended by adding the following section:-
“SECTION 8A. The General Laws are hereby amended by inserting after chapter 23M the following chapter:-
CHAPTER 23N.
REGULATION OF DAILY FANTASY SPORTS.
Section 1. As used in this chapter, the following words shall have the following meanings unless the context clearly requires otherwise:
“Commission”, the Massachusetts gaming commission established under chapter 23K.
“Daily fantasy sports”, an online or internet contest in which: (i) the offer or award of a monetary prize or prize of valuable consideration is connected to the statistical performance or finishing position of more than 1 person participating in the underlying professional sports competition, but does not include the offering or awarding of a prize to the winner of or participant in the underlying competition itself; and (ii) no winning outcome is based on the score, point spread or a performance of a single actual team or combination of teams or solely on a single performance of an individual athlete or player in a single actual event; provided, however, that daily fantasy sports shall not include a contest that encompasses an entire season of the activity in which the underlying competition is being conducted, consists of not less than 150 underlying competitions and the prize awarded, if any, is determined by agreement of the participants only in order to distribute fully the participants’ contributions to a fund established to award a prize for the contest.
“Game operator”, a person or entity that offers daily fantasy sports to a game participant.
“Game participant”, a person who or an entity that participates in a daily fantasy sports contest offered by a game operator.
“Gross revenue” or “Gross gaming revenue”, the total of all sums actually received by a game operator less the total of all sums paid out as winnings to game participants; provided, however, that the total of all sums paid out as winnings to game participants shall not include the cash equivalent value of any merchandise or other non-currency thing of value included in a jackpot or payout; provided further, that the issuance to or wagering by game participants of any promotional credit shall not be included for the purposes of determining gross revenue.
“Prize”, anything of monetary value including, but not limited to, money, game credits, merchandise or admission to another game or contest in which a prize may be awarded.
Section 2. (a) A game operator shall not offer daily fantasy sports unless registered with the commission.
(b) The registration application shall include: (i) the name and principal address of the applicant; (ii) the form of the applicant’s organization, including the place and date of incorporation and, if a foreign corporation, whether the applicant is qualified to do business in the commonwealth; (iii) the names and addresses of each officer, director, partner and trustee of the applicant; (iv) the names and addresses of each principal stockholder or member of such corporation of the applicant; (v) the addresses of all offices of the applicant in the commonwealth; (vi) the name and address of the designated agent for process in the commonwealth; (vii) evidence acceptable to the commission that the operator has established and will implement processes and procedures that satisfy all regulations promulgated by the attorney general and the commission related to daily fantasy sports; (viii) a list and description of all daily fantasy sports online games offered; and (ix) any additional information the commission deems necessary to ensure compliance with this chapter.
(c) Every registration shall be accompanied by a nonrefundable, initial application fee set by the commission, equal to the lesser of $50,000 or 1 and ½ per cent of the gross revenue generated by the registrant in the previous calendar year; provided, however, that if the registrant did not generate any gross revenue in the preceding year, the registrant shall be required to pay an initial registration of $25,000.
(d) The commission shall ensure an applicant has a system in place to fully comply with this chapter and any regulations promulgated by the attorney general.
(e) The commission shall issue a decision on registration not more than 90 days from receipt of a completed application. If registration is denied, the commission shall provide the operator with the justification for not issuing registration. Applicants may operate during an application period unless the commission or the attorney general has reason to believe that the operator is in violation of this chapter or regulations promulgated by the attorney general related to daily fantasy sports.
(f) Registered daily fantasy sports operators shall pay an annual renewal fee of $15,000.
Section 3. (a) No game operator shall offer daily fantasy sports content unless registered under section 2. A registered game operator shall:
(i)ensure fairness in game play;
(ii)prohibit misleading information about winning;
(iii)prominently display, prior to allowing a person to register as a game participant for the game operator, the percent of gross revenue retained by the game operator in the previous calendar year;
(iv)prohibit marketing efforts that encourage excessive play;
(v)prominently display messages about responsible gaming;
(vi)control for any apparent conflict of interest;
(vii)prevent the misuse of insider information and unfair advantages by an individual or group of individuals;
(viii)ensure data and transactional security; and
(ix)safeguarding segregation of player funds, financial guarantees, responsive customer service, limitations on deposits and secured transactions.
(b) The registered game operator, or an employee or agent thereof, shall at all times follow all regulations promulgated by the commission and by the attorney general relative to daily fantasy sports.
Section 4. A daily fantasy sports contest shall:
(i)require the use of geolocation technology by a game participant to verify that no player is located outside of the commonwealth;
(ii)require that a game participant be not less than 21 years of age;
(iii)(A) prominently display, prior to entrance into a daily fantasy sports contest, the value of all prizes and awards offered to a winning game participant; or (B) if the daily fantasy sports contest is limited to not more than 25 game participants and the entry fee is not more than $20 per game participant, prominently display, prior to entrance into the daily fantasy sports contest, the value of all prizes and awards offered to a winning game participant if 25 game participants enter the contest and the percentage of the payout in prizes and awards to each winning participant if less than 25 game participants enter the contest; and
(iv)prominently display, prior to entrance into a daily fantasy sports contest, the per cent of gross revenue retained by the game operator for the contest.
Section 5. (a) The commission shall audit the accounts, programs, activities and functions of all registered game operators as often as the commission determines necessary, but not less than annually.
(b) To conduct the audit, authorized officers and employees of the commission shall have access to such accounts at reasonable times and the commission may require the production of books, documents, vouchers and other records relating to any matter within the scope of the audit, except tax returns. The superior court shall have jurisdiction to enforce the production of records that the commission requires to be produced under this section and the court shall order the production of all such records within the scope of any such audit.
(c) All audits shall be conducted in accordance with generally accepted auditing standards. In any audit report of the accounts, funds, programs, activities and functions of a game operator issued by the commission containing adverse or critical audit results, the commission may require a response, in writing, to the audit results. The response shall be forwarded to the commission not more than 15 business days after notification by the commission.
(d) Not later than April 1 of each year, the commission shall submit a report to the clerks of the senate and house of representatives and the senate and house and committees on ways and means. The report shall include, but not be limited to: (i) the number of audits performed under this section, (ii) a summary of the findings of the audits, and (iii) the cost of each audit.
Section 7. (a) A registered game operator shall pay a tax of 12.5 per cent gross revenue. Taxes imposed under this section shall be remitted to the department of revenue quarterly by the registered game operator.
Section 8. (a) A game operator, or an employee or agent thereof, who violates this chapter shall be subject to a civil penalty not to exceed $2,000 for each violation, which may be recovered in a civil action brought by the commission or the attorney general. The penalty may be assessed whether or not the violation was willful. In determining the amount of the civil penalty, the commission or the attorney general shall consider: (i) the nature of the violation; (ii) the length of time the violation occurred; (iii) the risk to the public and to the integrity of operations created by the conduct of the person; (iv) the seriousness of the conduct of the person; (v) any justification or excuse for such conduct by the person; (vi) the prior history of the particular person involved; (vii) any corrective action taken by the person to prevent future misconduct; and (viii) other relevant factors.
(b) A game operator, or an employee or agent thereof, who willfully provides false or misleading information shall be subject to a civil penalty not to exceed $10,000 for each violation.
(c) In addition to collecting any civil penalties recoverable under this chapter or any other general or special law, the commission or the attorney general may bring an action in the superior court to restrain, prevent or enjoin any conduct prohibited by this chapter or to compel action to comply immediately and fully with any order issued by the commission or the attorney general. Except in cases of emergency where, in the opinion of the court, immediate abatement of the unlawful conduct is required to protect the public interest, the court may fix a reasonable time during which the person responsible for the unlawful conduct may abate and correct the violation. The expense of the proceeding shall be recoverable from the subject of the proceeding.
(d) The commission or the attorney general shall issue an order to cease and desist any activity if the commission or attorney general finds that a person is offering daily fantasy sports without a registration or a registered operator has engaged in or is about to engage in an act or practice that violates this chapter or constitutes an unfair method of competition or unfair or deceptive act or practice. The commission or the attorney general may take such affirmative action to effectuate the order.
Section 8. The commission shall promulgate regulations to implement this chapter.”; and
by inserting after section 56 the following section:-
“SECTION 56A. There shall be a special commission to conduct a comprehensive study and offer proposed legislation relative to the regulation of sports betting. The commission shall convene not later than August 15, 2018 and shall review all aspects of sports betting including, but not limited to: (i) economic development; (ii) consumer protection; (iii) taxation; (iv) legal and regulatory structures; (v) burdens and benefits to the commonwealth; and (vi) any other factors the commission deems relevant.
The commission shall consist of: 1 person who shall be jointly appointed by the president of the senate and the speaker of the house, who shall serve as chair; 2 people who shall be appointed by the governor who shall have industry expertise in gaming and sports betting; 1 person who shall be appointed by the Massachusetts gaming commission; 2 people who shall be appointed by the president of the senate; 1 person who shall be appointed by the minority leader of the senate; 2 people who shall be appointed by the speaker of the house of representatives; 1 person who shall be appointed by the minority leader of the house of representatives; 1 person who shall be appointed by the attorney general; and 1 person who shall be appointed by the state treasurer.
The commission shall submit recommendations for legislation with the clerks of the senate and the house of representatives not later than December 31, 2018.”; and
by inserting after section 62 the following section:-
“SECTION 62A. Notwithstanding any general or special law to the contrary, the July 31, 2018 sunset date provided for in section 135 of chapter 219 of the acts of 2016 shall be repealed upon the effective date of section 8A.”.