183292-1:n:03/01/2017:MA/mfc LRS2017-868




HB354
By Representatives Boothe, Clouse, Rowe and Martin
RFD State Government
Rd 1 02-MAR-17


SYNOPSIS:Under existing law, there are no regulations relating to fantasy contests.
 This bill would establish the Fantasy Contests Act. This bill would provide for the registration of certain fantasy sports operators conducting fantasy sports contests within the state. This bill would require the implementation of procedures for consumer protection of fantasy contest players and would provide for penalties for violations of the act. This bill would also exempt fantasy contests from the state prohibition against gambling.

A BILL
TO BE ENTITLED
AN ACT

Relating to regulating fantasy contests; to establish the Fantasy Contests Act; to provide definitions of certain terms; to require registration of certain fantasy contest operators; to require certain fantasy contest operators to implement procedures for consumer protection of fantasy contest players; to provide penalties for violations of the act; and to exempt fantasy contests from the prohibition against gambling.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the Fantasy Contests Act.

Section 2. For the purposes of this act, the following terms shall have the following meanings:

(1) CONFIDENTIAL INFORMATION. Information related to the play of a fantasy contest by fantasy contest players obtained as a result of or by virtue of a person's employment.

(2) ENTRY FEE. Cash or cash equivalent that is required to be paid by a fantasy contest player to a fantasy contest operator in order to participate in a fantasy contest.

(3) FANTASY CONTEST. Any fantasy or simulated game or contest in which one or more players compete against each other and winning outcomes reflect the relative knowledge and skill of the players and are determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sporting events.

(4) FANTASY CONTEST OPERATOR. A person or entity that offers fantasy contests with an entry fee for a cash prize to the general public.

(5) FANTASY CONTEST PLAYER. A person who participates in a fantasy contest offered by a fantasy contest operator.

(6) GROSS FANTASY CONTEST REVENUES. The amount equal to the total of all entry fees that a fantasy contest operator collects from all fantasy contest players, less the total of all sums paid out as winnings to all fantasy contest players, multiplied by the location percentage for Alabama.

(7) LOCATION PERCENTAGE. The percentage, rounded to the nearest tenth of a percent, of the total of all entry fees collected from fantasy contest players located in Alabama, divided by the total entry fees collected from all fantasy contest players in fantasy contests.

(8) REGULATOR. The Office of the Attorney General.

Section 3. (a)(1) Except as provided in subdivision (2), no fantasy contest operator shall offer any fantasy contest with an entry free in this state without first being registered with the Office of the Attorney General.

(2) A fantasy contest operator that offered fantasy contests in this state prior to May 1, 2016, may be entitled to a temporary registration to operate fantasy contests in this state, provided such operator files an application for registration with the Office of the Attorney General within 60 days of the application's availability, until the application for registration has been approved or denied.

(b) A fantasy contest operator's application for registration, and all attachments, shall be confidential and not subject to public disclosure or inspection.

(c) The Attorney General may not adopt rules or regulations limiting or regulating the rules or administration of an individual fantasy contest, the statistical makeup of a fantasy contest, or the digital platform of a fantasy contest operator.

(d) Before obtaining a registration to offer fantasy contests with an entry fee in this state, a fantasy contest operator must pay to the Office of the Attorney General an initial registration fee as follows:

(1) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to two million dollars ($2,000,000), the fantasy contest operator shall pay seventy-five thousand dollar ($75,000).

(2) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to one million dollars ($1,000,000), but less than two million dollars ($2,000,000), the fantasy contest operator shall pay fifty thousand dollars ($50,000).

(3) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to five hundred thousand dollars ($500,000), but less than one million dollars ($1,000,000), the fantasy contest operator shall pay twenty-two thousand five hundred dollars ($22,500).

(4) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to one hundred thousand dollars ($100,000), but less than five hundred thousand dollars ($500,000), the fantasy contest operator shall pay ten thousand dollars ($10,000).

(5) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to fifty thousand dollars ($50,000), but less than one hundred thousand dollars ($100,000), the fantasy contest operator shall pay five thousand dollars ($5,000).

(6) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months greater than or equal to ten thousand dollars ($10,000), but less than fifty thousand dollars ($50,000), the fantasy contest operator shall pay two thousand five hundred dollars ($2,500).

(7) For a fantasy contest operator with gross fantasy contest revenues for the preceding 12 months less than ten thousand dollars ($10,000), the fantasy contest operator shall pay one thousand ($1,000).

(e) A fantasy contest operator that has operated in this state, but not immediately preceding its application for registration, shall pay the initial registration fee based upon the gross fantasy contest revenues for the most recent 12-month period of operation in this state.

(f) On the anniversary date of the fantasy contest operator's registration, the fantasy contest operator shall annually pay to the Office of the Attorney General a registration renewal fee in accordance with the fee schedule in subsection (d).

(g) Any operator applying for registration, renewal, or transfer of a registration may operate during the application period unless the Office of the Attorney General has reasonable cause to believe that the operator is or may be in violation of this act and the Attorney General requires the operator to suspend the operation of any fantasy contest until registration or renewal of registration is issued.

(h) A registration is transferable.

Section 4. (a) A fantasy contest operator shall implement commercially reasonable procedures for fantasy contests with an entry fee that are intended to accomplish all of the following:

(1) Prevent employees of the fantasy contest operator, and relatives living in the same household as such employees, from competing in any such public fantasy contest offered by any fantasy contest operator in which the operator offers a cash prize to the general public.

(2) Prevent sharing of confidential information that could affect fantasy contest play with third parties until the information is made publicly available.

(3) Prevent the fantasy contest operator from participating in a fantasy contest he or she offers.

(4) Verify that a fantasy contest player in a fantasy contest is 19 years of age or older.

(5) Prevent the fantasy contest operator from offering fantasy contests based on the performances of participants in collegiate, high school, or youth athletic events.

(6) Prevent the fantasy contest operator from offering a fantasy contest open to the general public that does not establish and make known all prizes and awards offered to winning participants in advance of the game or contest.

(7) Provide that no winning outcome is based on the score, point spread, or any performance of any single actual sports team or combination of such teams or solely on any single performance of an individual athlete or participant in any single actual sporting event.

(8) Ensure that an individual who is a player in a real-world game or sporting event is restricted from participating in such a fantasy contest that is determined, in whole or in part, on the accumulated statistical results of that player, the player's real-world team, or the sport or competition in which he or she is a player.

(9) Allow individuals to restrict themselves from entering a fantasy contest upon request and provide reasonable steps to prevent the person from entering fantasy contests offered by the fantasy contest operator.

(10) Disclose the number of entries that a fantasy contest player may submit to each such fantasy contest and provide reasonable steps to prevent players from submitting more than the allowable number.

(11) Segregate fantasy contest player funds from operational funds or maintain a reserve that equals or exceeds the amount of player funds on deposit, which reserve may not be used for operational activities. These reserve funds may take the form of cash, cash equivalents, payment processor reserves, payment processor receivables, an irrevocable letter of credit, a bond, or a combination thereof, in the amount that must exceed the total balances of the fantasy contest players' accounts.

(b) A fantasy contest operator offering fantasy contests with an entry fee in this state must contract with a third party to annually perform an independent audit, consistent with the standards established by the American Institute of Certified Public Accountants, to ensure compliance with this act and must submit the results of the audit to the Attorney General.

(c) A fantasy contest operator offering fantasy contests with an entry fee in this state shall not target minors or other excluded players in any advertising.

(d) A fantasy contest operator may not offer a fantasy contest to the general public that does not establish and make known all prizes and awards offered to winning participants in advance of the game or contest.

Section 5. Any person, firm, corporation, association, agent, or employee who violates this act is subject to a civil penalty of not more than one thousand dollars ($1,000) for each violation, not to exceed five thousand dollars ($5,000) for violations arising out of the same transaction or occurrence, which shall accrue to the state and may be recovered in a civil action brought by the Attorney General.

Section 6. Article 2 of Chapter 12 of Title 13A, Code of Alabama 1975, does not apply to fantasy contests.

Section 7. This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.


Fantasy Contests
Gambling
Consumers and Consumer Protection
Business and Commerce
Attorney General
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