S06793 Summary:

Add Art 15 §§1500 - 1505, RWB L
Relates to regulation of interactive fantasy sports; requires registration and prohibits certain participants; imposes a 15% tax on gross revenue.
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S06793 Actions:

05/24/2016PRINT NUMBER 6793A
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S06793 Text:

                STATE OF NEW YORK
                    IN SENATE
                                    February 23, 2016
        Introduced  by  Sens.  BONACIC,  AVELLA,  RANZENHOFER  -- read twice and
          ordered printed, and when printed to be committed to the Committee  on
          Racing,  Gaming  and  Wagering  -- committee discharged, bill amended,
          ordered reprinted as amended and recommitted to said committee
        AN ACT to amend the racing, pari-mutuel wagering and  breeding  law,  in
          relation to interactive fantasy sports

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. The  racing,  pari-mutuel  wagering  and  breeding  law  is
     2  amended by adding a new article 15 to read as follows:
     3                                 ARTICLE 15
     4                         INTERACTIVE FANTASY SPORTS
     5  Section 1500. Legislative findings and purpose.
     6          1501. Definitions.
     7          1502. Registration.
     8          1503. Required safeguards/minimum standards.
     9          1504. Scope of registration review.
    10          1505. State tax.
    11    § 1500. Legislative findings and purpose. The legislature hereby finds
    12  and declares that:
    13    1.  Under  the New York penal law a person engages in gambling when he
    14  or she stakes or risks something of value upon the outcome of a  contest
    15  of  chance  or a future contingent event not under his or her control or
    16  influence, upon an agreement  or  understanding  that  he  or  she  will
    17  receive something of value in the event of a certain outcome;
    18    2. Interactive fantasy sports in many instances have been defined as a
    19  game of skill and were exempted from the definition of unlawful internet
    20  gambling  under  the  Unlawful Internet Gambling Enforcement Act of 2006
    21  (31 U.S.C. § 5362);
    22    3. Interactive fantasy sports consist of fantasy or simulation  sports
    23  games  or  educational  games  or contests in which the fantasy or simu-
    24  lation sports teams are selected based upon the skill and  knowledge  of
    25  the  participants  and  not based on the current membership of an actual
    26  team that is a member of an amateur or professional sports organization.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        S. 6793--A                          2
     1  As games of skill, interactive fantasy sports contests do not fall under
     2  the definition of gambling as prohibited by the penal law; and
     3    4.  The  legislature  further finds that as the internet has become an
     4  integral part of society, and interactive fantasy sports a major form of
     5  entertainment  for  many  consumers,  any  interactive  fantasy   sports
     6  enforcement and regulatory structure must begin from the bedrock premise
     7  that  participation  in a lawful and licensed interactive fantasy sports
     8  industry is a privilege and not a right, and that  regulatory  oversight
     9  is intended to safeguard the integrity of the games and participants and
    10  to ensure accountability and the public trust.
    11    § 1501. Definitions. As used in this article the following terms shall
    12  have the following meanings:
    13    1.  "Collegiate  sport  or  athletic  event" means a sport or athletic
    14  event offered or sponsored by or played in connection with a  public  or
    15  private  institution that offers education services beyond the secondary
    16  level.
    17    2.  "Commission" means the New York State gaming commission.
    18    3. "Entry fee" means cash or cash equivalent that is  required  to  be
    19  paid  by  a  fantasy  contest player to a registrant to participate in a
    20  fantasy contest.
    21    4. "Horse racing event" means any athletic or sporting event conducted
    22  in New York state subject to the provisions  of  this  chapter,  or  any
    23  athletic or sporting event conducted outside of New York state, which if
    24  conducted  in  New York state would be subject to the provisions of this
    25  chapter.
    26    5. "Interactive fantasy sports" means any fantasy or simulated game or
    27  contest with an entry fee, in which:
    28    (a) the value of all prizes and awards offered to winning participants
    29  are established and made known to the participants  in  advance  of  the
    30  contest  and  such value is not determined by the number of participants
    31  or the amount of any fees paid by those participants;
    32    (b) all winning outcomes reflect the relative knowledge and  skill  of
    33  the  participants  and  shall be determined predominantly by accumulated
    34  statistical  results  of  the  performance  of  individuals,   including
    35  athletes in the case of sports events; and
    36    (c)  no  winning  outcome  is based on the score, point spread, or any
    37  performance or performances of any single actual team or combination  of
    38  such  teams or solely on any single performance of an individual athlete
    39  or player in any single actual event.
    40    No interactive fantasy sports game or contest shall be offered involv-
    41  ing fantasy or simulation sports teams based upon  a  prohibited  sports
    42  event.
    43    6.  "Interactive  fantasy sports gross revenue" means the total of all
    44  entry fees paid to a registrant from interactive fantasy sports  involv-
    45  ing  authorized  participants,  less  only  the  total of all cash, cash
    46  equivalents, and promotional fantasy sports credits paid out to patrons.
    47    7. "Interactive fantasy sports  platform"  means  the  combination  of
    48  hardware,  software  and  data  networks  used  to manage, administer or
    49  control entry fees on interactive fantasy sports or  the  contests  with
    50  which those entry fees are associated.
    51    8.  "Internet"  means  a  computer  network  of  interoperable packet-
    52  switched data networks.
    53    9. "Registrant" means a person who is registered by the commission  to
    54  offer  interactive  fantasy  sports, using an interactive fantasy sports
    55  platform to authorized participants. A registrant may  utilize  multiple
    56  interactive fantasy sports platforms provided that platforms used solely

        S. 6793--A                          3
     1  to  provide  daily  interactive fantasy sports contests for an entry fee
     2  are approved by the commission.
     3    10.  "Noncommercial  contest  operator"  means  a person or entity who
     4  organizes and conducts an interactive fantasy  sports  contest,  or  who
     5  makes  available an interactive fantasy sports platform, whereby contest
     6  participants may be charged entry fees  for  the  right  to  participate
     7  therein  and the entry fees are collected, maintained and distributed by
     8  the same person or entity, provided all entry fees are returned  to  the
     9  players in the form of prizes or other equivalent.
    10    11.  "Prohibited participants" means: employees of interactive fantasy
    11  sports registrants; or individuals who have access to non-public  confi-
    12  dential  information  about  interactive fantasy sports contests; or any
    13  professional or amateur athlete whose performance may be used to  deter-
    14  mine  the outcome of a fantasy sports contest; or any sports agent, team
    15  employee, referee, or league official associated with any sport utilized
    16  for interactive fantasy sports contests; or individuals in states  where
    17  the conduct of interactive fantasy sports is prohibited.
    18    12.  "Prohibited  sports event" means any collegiate sport or athletic
    19  event or any horse racing event.
    20    13. "Season-long  fantasy  sports  contest"  means  a  fantasy  sports
    21  contest  offered  by a fantasy sports contest operator that is conducted
    22  over an entire sports season where the entry fee is paid  prior  to  the
    23  start of the season.
    24    §  1502.  Registration.  1.  The  commission shall, within one hundred
    25  eighty days of the date this article becomes law, promulgate regulations
    26  to implement interactive fantasy sports that require  an  entry  fee  in
    27  this  state  and  shall register entities to operate interactive fantasy
    28  sports with an entry fee involving authorized participants,  subject  to
    29  the  provisions  of this article and other applicable provisions of law.
    30  The commission  shall  promulgate  emergency  regulations  to  implement
    31  interactive  fantasy  sports  subject  to the provisions of this article
    32  within forty-five days of the date this article becomes law. The commis-
    33  sion shall promulgate regulations to protect consumers who play interac-
    34  tive fantasy sports and such regulations  shall  include,  but  are  not
    35  limited  to, responsible play protections with regard to problem gaming.
    36  This article and all rules adopted under the authority of  this  article
    37  shall  only  apply  to interactive fantasy sports contests when an entry
    38  fee is paid by a fantasy sports player at the time of entry for  partic-
    39  ipation in an interactive fantasy sports contest, and shall not apply to
    40  season-long fantasy sports contests.
    41    2.  No  person, other than a noncommercial contest operator, may oper-
    42  ate, manage or make available an  interactive  fantasy  sports  platform
    43  that  is  offered  to persons located in this state unless registered by
    44  the commission pursuant to  this  article.    Only  interactive  fantasy
    45  sports  platforms  which solely offer contests with an entry fee must be
    46  registered with the division.  However,  an  entity  that  was  offering
    47  interactive  fantasy  sports  contests  to  New  York residents prior to
    48  November tenth, two thousand fifteen, may continue  to  offer  the  same
    49  contests  to New York residents until their application for registration
    50  has been approved or denied, unless such entity fails to file an  appli-
    51  cation  for  registration  with the commission within ninety days of the
    52  issuance of emergency regulation pursuant to  subdivision  one  of  this
    53  section.
    54    3.  The  commission  shall  require all registrants with at least five
    55  thousand customers in New York to pay a one-time fee of  the  lesser  of
    56  five hundred thousand dollars or five percent of the interactive fantasy

        S. 6793--A                          4
     1  sports  gross revenue generated from New York participants in the previ-
     2  ous twelve months.
     3    4.  Registrations  issued by the commission shall remain in effect for
     4  ten years.
     5    5. The commission may delegate its responsibilities to administer  the
     6  provisions  of this article to the division of gaming, established under
     7  paragraph (c) of subdivision two of section one hundred  three  of  this
     8  chapter. The commission may not delegate its responsibilities to approve
     9  registrations.
    10    6.  Nothing  contained in article two hundred twenty-five of the penal
    11  law shall be applicable to an interactive fantasy sports contest offered
    12  by a registrant in accordance with the provisions of this article, or to
    13  an interactive fantasy sports contest with an entry fee, or  season-long
    14  interactive fantasy sports contest.
    15    §  1503.  Required  safeguards/minimum  standards.  The division shall
    16  require registrants to implement the following measures for  interactive
    17  fantasy sports with an entry fee that are intended to do the following:
    18    1.  Prevent  employees  of the registrant, and relatives living in the
    19  same household as such employees, from  competing  in  any  such  public
    20  fantasy sports contest.
    21    2.  Prohibit the registrant from being a contest participant in such a
    22  fantasy sports contest that he or she offers.
    23    3. Prevent the employees or agents  of  the  registrant  from  sharing
    24  confidential information that could affect such fantasy sports play with
    25  third parties until the information is made publicly available.
    26    4.  Verify  that contest participant is eighteen years of age or older
    27  through the use of a commercially available  database  or  aggregate  of
    28  databases  that  is  regularly  used for the purpose of age and identity
    29  verification and authentication.
    30    5. Restrict an individual who is a player, game  official,  coach,  or
    31  other participant in a real-world game or competition from participating
    32  in  such a fantasy sports contest that is determined in whole or in part
    33  on the performance of that individual, the individual's real-world team,
    34  or the accumulated statistical results of the sport  or  competition  in
    35  which he or she is a player, game official, or other participant.
    36    6. Allow individuals to restrict or prevent their own access to such a
    37  fantasy  sports contest and take reasonable steps to prevent those indi-
    38  viduals from entering a fantasy sports contest.
    39    7. Disclose the number of entries  a  single  fantasy  sports  contest
    40  player  may  submit to each such fantasy sports contest and take reason-
    41  able steps to prevent players from submitting more  than  the  allowable
    42  number.
    43    8. Ensure participants' funds are held in accounts segregated from the
    44  funds  of registrants and otherwise protected from corporate insolvency,
    45  financial risk or criminal or civil actions against the registrant.
    46    9. Protect the privacy and online security  of  participants  in  such
    47  interactive fantasy sports.
    48    10. Ensure the fairness and honesty of such interactive fantasy sports
    49  and  that appropriate measures are in place to deter, detect and, to the
    50  extent reasonably possible, to prevent  cheating,  including  collusion,
    51  and  use  of cheating devices, including use of software programs (some-
    52  times referred to as "bots" or  "scripts")  that  place  entry  fees  or
    53  adjust the players selected by a fantasy sports participant.
    54    11.  Prevent  prohibited  participants  from  maintaining  accounts or
    55  entering interactive fantasy sports contests offered by a registrant.

        S. 6793--A                          5
     1    12. Minimize compulsive  participation  in  such  interactive  fantasy
     2  sports  contests  and provide notice to participants of resources avail-
     3  able to help compulsive participation in fantasy sports contests.
     4    13.  Disclose the maximum number of contest participants for each such
     5  fantasy sports contest and ensure that no more than the  maximum  number
     6  of  contest  participants  actually  participate  in such fantasy sports
     7  contest.
     8    14. Offer all contest participants access to his or her player history
     9  and account details.
    10    15. Accurately represent the frequency or extent of winning,  and  not
    11  target  excluded  participants  or minors in advertising for interactive
    12  fantasy sports contests.
    13    § 1504. Scope of registration review. 1. The  division  shall  require
    14  that  each applicant, other than noncommercial contest operators, submit
    15  an application setting forth the following, unless such information  can
    16  be satisfied by, or found in, public records or filings:
    17    (a) The full name of the applicant.
    18    (b)  If a corporation, the name of the state in which incorporated and
    19  the names and addresses of the  officers,  directors,  and  shareholders
    20  holding  fifteen  percent  or more equity or, if a business entity other
    21  than a corporation, the names and addresses of the principals, partners,
    22  or shareholders holding five percent or more equity.
    23    (c) The names and addresses of the ultimate  equitable  owners  for  a
    24  corporation  or  other business entity, if different from those provided
    25  under paragraph (b), unless the securities of the corporation or  entity
    26  are  registered pursuant to § 12 of the Securities Exchange Act of 1934,
    27  15 U.S.C. §§ 78a-78kk; and if such corporation or entity files with  the
    28  United States Securities and Exchange Commission the reports required by
    29  §  13  of that act or if the securities of the corporation or entity are
    30  regularly traded on an  established  securities  market  in  the  United
    31  States.
    32    (d)  The estimated number of interactive fantasy sports contests to be
    33  conducted annually.
    34    (e) A statement of the assets and liabilities of the applicant.
    35    2. The commission may require the names and addresses of the  officers
    36  and  directors of any creditor of the applicant, and of those stockhold-
    37  ers who hold more than fifteen percent of the stock of the creditor.
    38    3. For each individual listed in the  application  as  an  officer  or
    39  director,  a  complete  set  of  fingerprints  that has been taken by an
    40  authorized law enforcement officer. These sets of fingerprints  must  be
    41  submitted to the Federal Bureau of Investigation for processing. Foreign
    42  nationals  shall submit such documents as necessary to allow the commis-
    43  sion to conduct criminal history records checks in the individual's home
    44  country. The applicant must pay the cost of processing.
    45    4. (a) A person or entity  is  not  eligible  for  registration  as  a
    46  contest operator or the renewal of a license if the person or an officer
    47  or  director of the entity has been convicted of a felony in this state,
    48  a felony in any other state which would be a felony if committed in this
    49  state under the laws of this state, or a felony under the  laws  of  the
    50  United  States,  or  if  the  applicant  for  such registration has been
    51  convicted of a felony or misdemeanor in this state, in any other  state,
    52  or under the laws of the United States, if such felony or misdemeanor is
    53  related to gambling or bookmaking.
    54    (b) The term "convicted" means having been found guilty, with or with-
    55  out adjudication of guilt, as a result of a jury verdict, nonjury trial,
    56  or entry of a plea of guilty or nolo contendere.

        S. 6793--A                          6
     1    5. The contest operator shall provide evidence of a surety bond in the
     2  amount  of  one  million  dollars,  payable to the state, furnished by a
     3  corporate surety authorized to do business in the state in such  a  form
     4  as established by commission rule. Such bond shall be kept in full force
     5  and  effect  by  the contest operator during the term of the license and
     6  any renewal thereof.
     7    § 1505. State tax. Registrants engaged in the business  of  conducting
     8  interactive  fantasy  sports pursuant to this article shall pay a privi-
     9  lege tax, based on the registrant's  percentage  of  annual  interactive
    10  fantasy  sports gross revenue generated from New York participants, at a
    11  fifteen percent rate.
    12    § 2. This act shall take effect immediately, however, an  entity  that
    13  was  offering  interactive fantasy sports contests to New York residents
    14  prior to November 10, 2015, may continue to  offer  interactive  fantasy
    15  sports contests to New York residents until their application for regis-
    16  tration has been approved or denied, unless such entity fails to file an
    17  application  with  the  commission within ninety days of the issuance of
    18  emergency regulations pursuant to article 15 of the racing,  pari-mutuel
    19  wagering and breeding law, as added by section one of this act.
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