Tennessee’s House has passed DFS legislation, adopting a bill that had already passed the state’s Senate.
The bill would legalize daily fantasy sports in the state and follows a state attorney general legal opinion issued earlier this month that said fantasy sports contests are illegal gambling under the state’s laws.
The House version of the state’s Fantasy Sports Tax Act would require DFs operators to be licensed in the state and also limits players to betting no more than $2,500 per month, unless they can show that the limit should be increased.
The bill creates a task force to set licensing requirements, imposes a 6 percent tax on revenue generated from Tennessee residents and sets an age restriction of at least 18 years as well as other consumer protections.
It now goes to the desk of Governor Bill Haslam.
In Illinois, that state’s House judiciary panel gave initial approval to a DFS bill, which will now receive a full vote.
The state’s attorney general has also ruled that the games are illegal in the state under its current laws.
“I know this is a controversial bill,” said Rep. Mike Zalewski, sponsor of the bill. “Constituents of ours play these games and regardless of whether we agree with their decisions to do so, we’re faced with the choice of deciding whether we want to protect them from the reality we know exists and make sure that they enjoy the games in a reasonable way.”
Under the bill, the Illinois Gaming Board would regulate the industry in the state. Operators would pay applications and licensing fees based on the revenue they generate. Companies with more than $10 million in revenue would pay a $50,000 licensing fee, while those with less than $100,000 in revenue would pay $1,500, according to pantagraph.com
Taxes would also be paid on a sliding scale, with companies that make more than $15 million in profits annually paying the highest rate of 22.5 percent.
The bill also sets 21 as the minimum age to play. The DFS industry has been lobbying for a minimum age of 18.
Meanwhile, a Mississippi bill sets up the Fantasy Contest Task Force, which would “undertake a comprehensive review of the offering of fantasy contests with a fee within this state and to recommend the proper oversight and regulation of the offering of fantasy contests with a fee.”
Mississippi’s attorney general has also ruled that the games are illegal in the state under its current laws and most DFS sites have stopped operating in the state.
According to Legal Sports Report, the bill also temporarily allows DFS sites to operate in the state through July 1 of 2017. The bill sets consumer protections such setting a minimum age for play of 18, allowing players to exclude themselves from playing, if they desire and segregates player funds from operational funds.
Sites wishing to operate in the state must register with the state. If new legislation is not passed before July of next year, DFS would presumably become illegal in the state again.
The bill now heads to the desk of Governor Phil Bryant.
Connecticut Attorney General George Jepsen last week warned lawmakers that if they legalize daily fantasy sports (DFS) it could threaten the state’s tribal state gaming compacts with the Mohegan and Pequot tribes.
Jepsen’s opinion left the proposed bill taking on water by the end of the week. The bill, which was passed in the Finance Revenue and Bonding Committee, would collect an 8.75 percent fee on entry fees paid to companies such as FanDuel and DraftKings. It would also require the Department of Consumer Protection to adopt regulations for DFS, including player protections.
These companies insist they are games of skill, although critics argue that they are a form of gambling.
Although supporters of legalizing fantasy sports point to an anticipated $9.5 million a year in taxes, that compares to a gaming industry that pours in excess of $200 million into state coffers annually. None of the lawmakers want to endanger that source.
The legislature’s leadership, Senate President Pro Tem Martin Looney and Senate Majority Leader Bob Duff had asked for a former opinion from the AG and in his reply Jepson said there was “a high degree of uncertainty” and “a substantial risk” In taking the money.
“There is a substantial risk that the passage of such legislation could jeopardize the state’s revenue-sharing arrangements with the tribes,” Jepsen said in the opinion.
After that statement was released Looney released his own statement: “Due to the risk and uncertainty that would result from a potential legal challenge, the prospect of passing legislation this session is unlikely,” he said.
The tribes pay 25 percent of their gaming revenue to the state from the Foxwoods Resort Casino and the Mohegan Sun in compacts that were negotiated in the 1990s.
Although revenues have been in decline for the last decade as other states have added casinos, it still amounted to $263 million last year. But the kicker is that the tribes are guaranteed a monopoly on gaming in the state. If they don’t get that they don’t have to pay the 25 percent.
Last week the Mashantucket Pequot Tribal Nation reported that Foxwoods’ slots revenue fell 7.3% in March to $37.5 million. The Mohegan Sun, reported that slots revenue was down 1.4% to $50.5 million.
The question in Jepson’s view is whether fantasy sports is a form of gambling, as several other states’ attorneys general have opined. Jepsen doesn’t weigh in on that issue, but notes that the tribal gaming compacts define slot machines as “video facsimile machines.” That opens the way for the question of whether fantasy sports are games of skill or games of chance, according to the AG.
Several other attorneys general “have concluded, either formally or informally, that these games constitute illegal gambling under their states’ respective criminal laws,” he wrote.
Jepson concluded, “I want to emphasize that, if these issues were ever to be litigated in court, there are sound arguments that could be made that the Compacts and MOUs are not implicated by daily fantasy sports contests.” He added, “Nonetheless, no one can predict with any level of certainty how a court, if faced with these issues, would rule.”
The bill in question would have exempted DFS from the definition of gambling. Jepson point out that if DFS were games of skill rather than a form of gambling that there would be no need for the legislature to pass a bill exempting them from the definition of gambling.
So far neither tribe has taken a position on the DFS bill, although spokesmen said they were watching the process closely.
The Attorney General’s office has no jurisdiction over criminal gambling laws, which is under the jurisdiction of the Office of the Chief State’s Attorney. But he does issue opinions on law when requested by state officials.
The state legislature is searching for ways to deal with a projected $922 million deficit in next year’s budget.
