A3532

An Act providing for the regulation of daily fantasy sports games and supplementing Title 5 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. As used in this section:

“daily fantasy sports game” means any fantasy or simulated game or contest involving athletic events in which a participant owns or manages an imaginary sports team and competes against other participants or a target score for a predetermined prize with the outcome reflecting the relative skill of the participants and determined by statistics generated based on performance by actual individuals participating in actual professional or collegiate athletic events, provided that the outcome shall not be based solely on the performance of an individual athlete, or on the score, point spread, or any performance of any single real team or combination of real teams;

“daily fantasy sports gross revenue“ means the total of all sums actually received by a daily fantasy sports provider from daily fantasy sports game operations less only the total of all sums actually paid out as prizes to participants; and

“daily fantasy sports provider” means a business entity, including a casino licensee, that has been issued a permit by the Department of Law and Public Safety to offer persons the opportunity to participate in a daily fantasy sports game.

b. A daily fantasy sports provider seeking to conduct daily fantasy sports games shall apply to the department for a permit to conduct such games on such forms and in such manner as the department shall require. The department shall promptly investigate each application, inspect and examine all premises where daily fantasy sports games are conducted, and oversee the conduct of games. The department shall charge a permit fee to each daily fantasy sports provider that applies for a permit in an amount sufficient to cover the department’s cost in issuing daily fantasy sports permits and overseeing the conduct of such games, which permit fee shall be in addition to the annual registration and renewal fee required pursuant to subsection g. of this section.

A provider operating daily fantasy sports games on the date of enactment of this act, P.L. , c. (C. ) (pending before the Legislature as this bill) shall be permitted to continue its operations pending approval of the provider’s application for a permit. A provider that is not operating daily fantasy sports games on the date of enactment of this act shall be prohibited from operating daily fantasy sports games pending approval of the provider’s application for a permit.

Upon the granting of a permit, a provider may continue to operate daily fantasy sports games pending the renewal of the provider’s permit, provided that the provider has applied for the renewal in a timely manner.

c. (1) With respect to a permit holder that is a casino, all equipment used by the holder of the permit, including computers and servers, to conduct daily fantasy sports games shall be physically located within the boundaries of the municipality specified in section 20 of P.L. 2013, c.27 (C.5:12-95.22) for the location of Internet gambling equipment.

(2) With respect to a daily fantasy sports provider that is not a casino, at least one server used to conduct daily fantasy sports games shall be physically located within the boundaries of the municipality specified in section 20 of P.L. 2013, c.27 (C.5:12-95.22) on or before January 1, 2018.

d. The department shall regulate the conduct of daily fantasy sports games by daily fantasy sports providers that have been issued a permit by the department to conduct daily fantasy sports games.

e. The department shall permit a daily fantasy sports provider to conduct daily fantasy sports games subject to the following conditions:

the outcome shall be determined by statistics generated based on the performance of actual individuals participating in real professional or collegiate athletic events;

all prizes offered to participants shall be established and disclosed in advance to all participants;

the outcome shall not be based solely on the performance of an individual athlete, or on the score, point spread, or any performance of a single real team or combination of real teams;

a daily fantasy sports provider may permit participants to use a mobile wagering account or a participant deposit account;

a casino licensee may use its facilities to accept entry fees and to pay prizes;

a casino licensee may partner with, or enter into a contract with, one or more daily fantasy sports providers to offer daily fantasy sports games, notwithstanding the provisions of section 104 of P.L. 1977, c.110 (C. 5:12-104);

a participant in a daily fantasy sports game shall be at least 18 years of age;

a person listed on the Division of Gaming Enforcement’s self-exclusion list or Internet gaming self-exclusion list shall not be allowed to participate in a daily fantasy sports game; and

a daily fantasy sports provider shall not market daily fantasy sports to any person listed on the division’s self-exclusion list or Internet gaming self-exclusion list.

f. A daily fantasy sports provider shall:

prohibit its employees, and immediate family members thereof living in the same household, from participating in a daily fantasy sports game offering a cash prize greater than $5;

prohibit the sharing of statistical information with third parties that could affect a daily fantasy sports game until that information is publicly available;

not participate in a daily fantasy sports game offered by that daily fantasy sports provider;

adopt procedures to ensure that a daily fantasy sports participant is at least 18 years of age;

ensure that individuals who participate or officiate in a game that is the subject of a daily fantasy sports game shall not participate in a daily fantasy sports game that is determined, in whole or in part, on the accumulated statistical results of a team of individuals in the game or contest in which that person is a participant or official;

offer individuals the ability to restrict themselves from participating in daily fantasy sports games and take reasonable steps to prevent any such individual from participating in daily fantasy sports games;

disclose the number of entries a participant may submit to each daily fantasy sports game and take reasonable steps to prevent a participant from exceeding that number; and

segregate participant’s funds from operational funds and maintain a reserve in cash, cash equivalents, an irrevocable letter of credit, a bond, or a combination thereof in the amount of the deposits in participants’ accounts for the benefit and protection of authorized daily fantasy sports games participants funds held in daily fantasy sports game accounts.

g. A daily fantasy sports provider shall pay an annual registration and renewal fee in an amount equal to 9.25 percent of daily fantasy sports gross revenue.

With respect to a permit holder that is a casino, an entry fee, management fee, or other revenue generated from a fantasy sports game shall not be considered “gross revenue” as defined in section 24 of P.L.1977, c.110 (C.5:12-24) or “Internet gaming gross revenue” as defined in section 6 of P.L.2013, c.27 (C.5:12-28.2), and no investment alternative tax provided for by any other provision of law shall apply to daily fantasy sports providers.

h. (1) Any person who provides daily fantasy sports games without approval of the department to do shall be subject to a fine of not more than $25,000 and, in the case of a person other than a natural person, to a fine of not more than $100,000, and to any other appropriate disposition authorized by law.

(2) Any person who knowingly tampers with software, computers, or other equipment used to conduct daily fantasy sports games to alter the odds or the payout of a game or disables the game from operating according to the rules of the game as promulgated by the department shall be subject to a fine of not more than $50,000 and, in the case of a person other than a natural person, to a fine of not more than $200,000, and to any other appropriate disposition authorized by law.

(3) Any person who knowingly offers or allows to be offered any daily fantasy sports game that has been tampered with in a way that affects the odds or the payout of a game or disables the game from operating according to the rules of the game as promulgated by the department shall be subject to a fine of not more than $50,000 and, in the case of a person other than a natural person, to a fine of not more than $200,000, and to any other appropriate disposition authorized by law.

(4) Any person who violates any provision of this section shall be subject to a fine of not more than $25,000 and, in the case of a person other than a natural person, to a fine of not more than $100,000, and to any other appropriate disposition authorized by law.

(5) Notwithstanding the penalties provided for in this subsection, the department shall, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt and promulgate such rules and regulations as may be necessary to address additional violations of this section. The department shall also have the authority to disqualify a provider when the provider withdraws from the operation of daily fantasy sports games, by suspending the operations of the provider, or by revoking the permit to conduct such operations.

i. Daily fantasy sports games shall be conducted in New Jersey only in accordance with the provisions of this section.

2. This act shall take effect on the 90th day after the date of enactment, except that the Department of Law and Public Safety may take any anticipatory administrative actions in advance as shall be necessary for the implementation of this act.

STATEMENT

This bill provides that the Department of Law and Public Safety will issue permits to casino licensees and other business entities that desire to conduct daily fantasy sports games in New Jersey and will be responsible for regulating that activity. The department will charge each participating casino or daily fantasy sports provider a permit fee in an amount sufficient to cover the department’s cost in issuing daily fantasy sports permits and overseeing the conduct of such games.

With respect to a permit holder that is a casino, all equipment used by the holder of the permit, including computers and servers, to conduct daily fantasy sports games shall be physically located within the boundaries of Atlantic City for the location of Internet gambling equipment.

With respect to a daily fantasy sports provider that is not a casino, at least one server used to conduct daily fantasy sports games shall be physically located within the boundaries of the Atlantic City on or before January 1, 2018.

The bill also provides that:

the outcome of a game will be determined by statistics generated based on the performance of actual individuals participating in real professional or collegiate athletic events;

all prizes offered to participants will be established and disclosed in advance to all participants;

the outcome will not be based solely on the performance of an individual athlete, or on the score, point spread, or any performance of a single real team or combination of real teams;

a daily fantasy sports provider may permit participant to use a mobile wagering account or a participant deposit account;

a casino licensee may use its facilities to accept entry fees and to pay prizes;

a casino licensee may partner with, or enter into a contract with, one or more daily fantasy sports providers to offer daily fantasy sports games;

a participant in a daily fantasy sports game must be at least 18 years of age;

a person listed on a casino gambling self-exclusion list or Internet gaming self-exclusion list will not be allowed to participate in a daily fantasy sports game; and

a casino or a daily fantasy sports provider will not market daily fantasy sports to any person listed on a casino gambling self-exclusion list or Internet gaming self-exclusion list.

In addition, the bill contains provisions to address ethical issues that may confront casinos and daily fantasy sports providers. A casino or provider must:

prohibit its employees, and immediate family members thereof living in the same household, from participating in a daily fantasy sports game offering a cash prize greater than $5;

prohibit the sharing of statistical information with third parties that could affect a daily fantasy sports game until that information is publicly available;

not participate in a daily fantasy sports game offered by that casino or daily fantasy sports provider;

adopt procedures to ensure that a daily fantasy sports participant is at least 18 years of age;

disclose the number of entries a participate may submit to each daily fantasy sports game and take reasonable steps to prevent a participant from exceeding that number; and

segregate participant’s funds from operational funds and maintain a reserve in cash, cash equivalents, an irrevocable letter of credit, a bond, or a combination thereof in the amount of the deposits in participant accounts for the benefit and protection of authorized daily fantasy sports games participants funds held in daily fantasy sports game accounts.

The bill imposes an annual registration and renewal fee for all daily fantasy sports providers in an amount equal to 9.25% of daily fantasy sports gross revenue. Also, the bill sets forth penalties for violations of the provisions of the bill and regulations.

Daily fantasy sports games will be conducted in New Jersey only in accordance with the bill’s provisions.

The bill will take effect on the 90th day after the date of enactment, but the Department of Law and Public Safety may take any anticipatory administrative actions in advance as may be necessary for the bill’s implementation.