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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.