It has been a good year so far for fantasy sports and particularly the daily fantasy sports (DFS) giants DraftKings and FanDuel; three states in the country, had already legalised fantasy sports; and now Mississippi has become the fourth state to join the club – a new bill has just been signed into law, this week, to legalise and regulate fantasy sports in the Magnolia State.
Mississippi Governor Signed Fantasy Sports Bill
Mississippi State Governor, Phil Bryant, signed the fantasy sports regulation bill, S 2541- Fantasy Contest Act, into law just in the nick of time; Friday was the deadline for him to make a decision on the gaming bill and he managed to sign it into law in time.
This is both a surprise and a victory for the DFS operators; the Mississippi State Attorney General issued a negative opinion earlier this year, classifying fantasy sports as a form of illegal gambling in Mississippi and as a result the DFS operators were forced to cease their real money services for the residents of the state in January, 2016.
Bills to legalise fantasy sports have been seen in more than 30 states so far, just this week alone, fantasy sports bills were sent to each of the governors of Missouri, Colorado, Mississippi and Minnesota. The news of the Mississippi bill being passed into law came after the news of progress on both the Missouri and Colorado bills, which had been sent to their respective governors; the only hold up was in Minnesota, where the state governor decided to shelve the bill for the current legislative session.
With regards to the newly opened DFS market in Mississippi, there have been no announcements made by either of the DFS leaders, FanDuel or DraftKings, about re-entering the market and opening up real money tournaments to the residents yet.
Bill S 2541- Fantasy Contest Act
It has been said that the Mississippi bill is much less complex a piece of legislation compared to many of the bills in other jurisdictions.
The Fantasy Contest Task Force
Firstly, the bill calls for setting up The Fantasy Contest Task Force, which will be made up of seven members appointed within 30 days and be chaired by the Chairperson of the Senate Judiciary Committee. The committee’s main responsibility would be to review the industry and suggest more comprehensive regulations.
The Fantasy Contest Act, clearly states that from now on all fantasy sports shall be classified as legal activity. As fantasy sports have been unambiguously declassified from gambling, all fantasy sports providers will have to ensure that the winning outcome from each real money contest reflects the “relative knowledge and skill of the player;” care has to be taken to make sure that winning outcomes are “not based on the score, or one individual player’s performance or event”; this would reflect the characteristics of a game of luck rather than one of skill.
Under the bill, all fantasy sports operators will have to register and acquire a license to operate in the state of Mississippi; however, unlike many of the other states, where licensing fees have practically rendered the small DFS operators out of business, registration in Mississippi would require the operator to pay no licensing fee.
Under the new law, the operators have to ensure the company’s financial dealings are managed effectively; operational funds and prize money has to always be kept separate from each other and a reserve of funds is to be maintained in the amount of the deposits made to the accounts of fantasy contest players “for the benefit and protection of the funds held in the accounts.”
The new law also states that after the first year of registration, each DFS operator must employ a third-party to carry out a full audit; this is to ensure compliance with the law; and the result of the audit has to then be submitted to the Mississippi Gaming Commission.
Taxes and Penalties
Fortuantely for the DFS operators, no tax amount has been mentioned in the bill; however, it has been stated that violation of the Fantasy Contest Act shall incur a civil penalty of a maximum sum of $10,000, for each offence.
At this given time, the bill would implement some basic consumer protections practices.
Professional Sports Only
Firstly, all contests held on the DFS sites must be restricted to professional athletes and professional athletic events. The DFS sites will no longer be able to offer fantasy contests based on collegiate level sports events or any other youth sports matches.
Legal age for participation in the state has been fixed at 18 years or over and the operator has to take due care to verify the age of all participants.
Level Playing Field
The new law states that in order to make the contests fair, DFS company employees and their immediate family members, living at the same address, are barred from taking part in any matches offered by the DFS site.
The DFS operators have to also take care and make sure no confidential information, which could affect the outcome of the contests, is shared or released to a third-party.
Thirdly, the law states that each player has to disclose the number of entries they have made to a single fantasy contest and it is the DFS operators responsibility to ensure that the contestants to do not exceed the number of allowable entry submissions.
Gambling Addiction Prevention Steps
One of the setbacks that almost all DFS legislation has encountered is the possibility of encouraging gambling addiction; in order to prevent a rise in addiction and associated financial and other issues, players who wish to exclude themselves from taking part in fantasy sports matches have to be allowed the opportunity to do so and the operator will have to verify the situation if the player wishes to re-enter the games.
It should be noted that the law mentioned above repeals itself on July 1, 2017; by which time, the Fantasy Contest Task Force would have completed their reviews and the state could implement more robust regulation.
DFS Legislation Climate Elsewhere
Besides Mississippi, Indiana, Virginia and Tennessee have also passed DFS laws this year and two fantasy sports bills are waiting for the State Governor’s signatures in Colorado and Missouri. The state of Kansas passed a DFS bill last year and Massachusetts instituted regulations for the industry in 2016.
Only a few more states seem to have a realistic chance of passing DFS legislation this year; two crucial states in the run are Illinois and New York.
DFS giants, FanDuel and DraftKings are challenging a negative Attorney General opinion in court in Illinois; and the Illionois gaming bill has seen little progress and seems unlikely to be signed into law this year.
After a long legal ordeal, FanDuel and DraftKings have reached a settlement with the New York State Attorney General in March, this year; but have not reached a legislative solution. The DFS operators were counting on a bill from State Rep. Gary Pretlow, which was expected to be ready last month but with just one month left in this year’s legislative session, it is difficult to predict how the DFS legislature in New York will pan out.[sc:draftkings]