NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10736
SPONSOR: Rules (Pretlow) TITLE OF BILL:
An act to amend the racing, pari-mutuel wagering and breeding law, in
relation to the registration and regulation of interactive fantasy
sports contests
PURPOSE OR GENERAL IDEA OF BILL:
To provide for the registration, regulation, and taxation of interactive
fantasy sports contests in New York State.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill would amend the Racing, Pari-Mutuel Wagering and
Breeding Law by adding a new Article 14 which would register and regu-
late interactive fantasy sports contests with an entry fee. Specif-
ically:
Section 1400 provides legislative findings and purpose. Section 1401
provides definitions.
Section 1402 authorizes the registration of interactive fantasy sports
operators to conduct interactive fantasy sports contests in New York
State. Any operator that was offering contests to New York state resi-
dents prior to November 10, 2015 would be able to continue operating
until their application for registration has been approved or denied,
provided that such operator files an application for registration with
the New York State Gaming Commission ("the Commission") within ninety
days of the promulgation of regulations to effectuate this article. Such
operators would also receive a temporary permit to operate under the
required safeguards and minimum standards until their application has
been approved or denied. Registrations would remain in effect for three
years.
Section 1403 establishes the scope of information required from an
interactive fantasy sports operator upon submission of an application
for registration to the Commission.
Section 1404 establishes required safeguards and minimum standards in
order to provide players with important consumer protections, including:
*limiting players to one active and continuously used account;
*prohibiting persons under the age of 18 from participating in any
contest;
*ensuring that accurate representations concerning the chances of
winning, and the number of winners, are depicted in all advertisements;
*ensuring that, unless otherwise approved by the Commission, online
fantasy or simulation sports games or contests with an entry fee are not
being directly or indirectly promoted or advertised during the conduct
of any online fantasy or simulation sports games or contests without an
entry fee;
*enabling players to exclude themselves from contests and permanently
close their accounts at any time;
*offering introductory procedures for players, and identifying highly
experienced players;
*disclosing the number of entries a player may submit to each contest,
and the number of total entries allowed for each contest;
*measures to protect the privacy and online security of players and
their accounts;
*ensuring players' funds are protected upon deposit and segregated from
the operating funds of the operator or registrant; and
*information concerning assistance for compulsive play in New York
State.
This section would also limit the number of entries that can be submit-
ted by a player to any contest, prohibit any contest based on a collegi-
ate or high school sport or athletic event, prohibit any contest based
on a horse racing event, prohibit the use of third-party scripts or
scripting programs, and ensure that advertisements for contests and
prizes do not target prohibited participants, minors, or self-excluded
persons.
Section 1405 authorizes the Commission to promulgate regulations to
implement the provisions of this article. This section also assigns the
Commission with all powers necessary and proper to fully and effectively
execute this article, including the ability to accept and investigate
complaints from players and investigate alleged violations of this arti-
cle.
Section 1406 requires each registrant to submit an annual report to the
Commission no later than June 30 of each year. The Commission would be
authorized to conduct a financial audit of any registrant, at any time,
to ensure compliance with this article. The Commission would also be
required to publish a report based on the aggregate information provided
by all registrants' reports, which would be published on the Commis-
sion's website.
Section 1407 imposes a 15% State tax on each registrant's interactive
fantasy sports gross revenue for the privilege of conducting interactive
fantasy sports contests in New York State, as well as an additional 0.5%
tax that is not to exceed $50,000 annually.
Section 1408 allows the Commission to assess the actual costs necessary
to regulate registrants pursuant to this article.
Section 1409 requires the Commission to direct all taxes, interest, and
penalties collected to the State Lottery Fund for education.
Section 1410 authorizes the Commission to perform audits of the books
and records of operators with permits and registrants, for the purpose
of determining the sufficiency of tax payments.
Section 1411 provides authorization for interactive fantasy sports
contests registered and conducted pursuant to this chapter.
Section 1412 prohibits the conduct of unregistered interactive fantasy
sports contests.
Section 2 of the bill would give the Commission the authority and
responsibility of registering and regulating interactive fantasy sports
in New York State.
Section 3 of the bill would establish an immediate effective date.
JUSTIFICATION:
On October 6, 2015, the New York State Attorney General's office
launched an investigation into whether employees of the two biggest
daily fantasy sports companies, DraftKings and FanDuel, were able to
gain an unfair financial advantage in daily fantasy football contests by
exploiting access to non-public data. On November 10, the Attorney
General's office issued a notice to DraftKings and FanDuel demanding
that they stop accepting wagers in New York. After months of additional
litigation, DraftKings and FanDuel reached an agreement with the Attor-
ney General to stop taking bets from New York customers on March 21,
2016. The agreements outlined the process the companies and the Attorney
General would follow in the event that the State Legislature does or
does not take action to legalize and regulate daily fantasy sports
contests, as well as establish a statutory framework to protect consum-
ers, on or before June 30, 2016.
Bearing in mind that "paid" interactive fantasy sports contests have the
potential to produce unfair advantages for certain players, target
minors, and increase compulsive play, this bill seeks to regulate all
interactive fantasy sports contests with an entry fee, including daily
and season-long.
This bill offers important consumer protections to ensure that all
contests are safe and fair. Requirements such as limiting players to one
active and continuously used account, offering introductory procedures
for players, identifying highly experienced players, and depicting accu-
rate representations concerning the chances of winning in all advertise-
ments will help to provide transparency and fairness across all plat-
forms. Measures to protect the privacy and online security of players
and their accounts, and requiring registrants to protect players' funds
upon deposit, as well as segregate such funds from the companies' oper-
ating funds, would provide players with important safety and security
protections online.
In addition, requirements would be in place to ensure that players can
exclude themselves from contests and permanently close their accounts at
any time if they feel that they are becoming compulsive players. For
this reason, registrants will also be required to provide information on
their websites concerning assistance for compulsive play in New York
State. Because of the risks associated with compulsive play, no person
under the age of 18 would be permitted to participate in an interactive
fantasy sports contest.
By taxing interactive fantasy sports contests, and directing such funds
to the State Lottery Fund, this bill will also bring about a new and
abundant source of revenue for education in New York State.
LEGISLATIVE HISTORY:
This is new legislation.
FISCAL IMPLICATION:
To be determined.
EFFECTIVE DATE:
This act would take effect immediately.
