House Study Bill 52 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON VANDER LINDEN) A BILL FOR An Act relating to fantasy sports contests, providing for a 1 tax, making an appropriation, making penalties applicable, 2 and including implementation provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1635YC (3) 87 ec/nh
H.F. _____ Section 1. NEW SECTION . 99E.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Applicant” means an internet fantasy sports contest 4 service provider applying for a license to conduct internet 5 fantasy sports contests under this chapter. 6 2. “Commission” means the state racing and gaming commission 7 created under section 99D.5. 8 3. “Fantasy sports contest” includes any fantasy or 9 simulated game or contest in which the fantasy sports contest 10 operator is not a participant in the game or contest, the value 11 of all prizes and awards offered to winning participants are 12 established and made known to the participants in advance 13 of the contest, all winning outcomes reflect the relative 14 knowledge and skill of the participants and shall be determined 15 by accumulated statistical results of the performance of 16 individuals, including athletes in the case of sporting events, 17 in a fully completed game or contest, and no winning outcome 18 is based on the score, point spread, or any performance or 19 performances of any single actual team or solely on any single 20 performance of an individual athlete or player in any single 21 actual event. For purposes of this subsection, “fully completed 22 game or contest” means the entirety of the game or contest, and 23 not merely any portion thereof, and includes the entirety of a 24 game or contest that has been suspended or shortened on account 25 of weather or other natural or unforeseen event. 26 4. “Internet fantasy sports contest” means a method of 27 entering a fantasy sports contest by which a person may 28 establish an account with an internet fantasy sports contest 29 service provider, deposit money into the account, and use 30 the account balance for entering a fantasy sports contest by 31 utilizing electronic communication. 32 5. “Internet fantasy sports contest adjusted revenues” means, 33 for each internet fantasy sports contest, the amount equal to 34 the total charges and fees collected from all participants 35 -1- LSB 1635YC (3) 87 ec/nh 1/ 13
H.F. _____ entering the internet fantasy sports contest less winnings paid 1 to participants in the contest, multiplied by the location 2 percentage. 3 6. “Internet fantasy sports contest player” means a person 4 who is at least twenty-one years of age and participates in an 5 internet fantasy sports contest operated by an internet fantasy 6 sports contest service provider. 7 7. “Internet fantasy sports contest service provider” means 8 a person, including a licensee under chapter 99D or 99F, who 9 conducts an internet fantasy sports contest as authorized by 10 this chapter. 11 8. “Location percentage” means, for each internet fantasy 12 sports contest, the percentage, rounded to the nearest tenth of 13 a percent, equal to the total charges and fees collected from 14 all internet fantasy sports contest players located in this 15 state divided by the total charges and fees collected from all 16 participants in the internet fantasy sports contest. 17 Sec. 2. NEW SECTION . 99E.2 Internet fantasy sports contests 18 authorized. 19 The system of entering an internet fantasy sports contest as 20 provided by this chapter is legal when conducted by a licensed 21 internet fantasy sports contest service provider as provided in 22 this chapter. 23 Sec. 3. NEW SECTION . 99E.3 Commission —— powers. 24 The commission shall have full jurisdiction over and shall 25 supervise internet fantasy sports contests and internet fantasy 26 sports contest service providers as governed by this chapter. 27 The commission shall have the following powers and shall adopt 28 rules pursuant to chapter 17A to implement this chapter: 29 1. To investigate applicants and determine the eligibility 30 of applicants for a license to conduct internet fantasy sports 31 contests. 32 2. To license and regulate internet fantasy sports contest 33 service providers subject to the requirements of this chapter. 34 3. To investigate alleged violations of this chapter 35 -2- LSB 1635YC (3) 87 ec/nh 2/ 13
H.F. _____ or the commission rules, orders, or final decisions and to 1 take appropriate disciplinary action against a licensee, or 2 institute appropriate legal action for enforcement, or both. 3 Information gathered during an investigation is confidential 4 during the pendency of the investigation. 5 4. To assess fines and revoke or suspend licenses. 6 5. To require, beginning July 1, 2019, licensees to 7 establish a process with the state for licensees to have 8 electronic access to names and social security numbers of 9 debtors of claimant agencies through a secured interactive 10 internet site maintained by the state. 11 6. To take any other action as may be reasonable or 12 appropriate to enforce this chapter and the commission rules. 13 Sec. 4. NEW SECTION . 99E.4 Requirements of applicant —— fee 14 —— penalty. 15 1. An applicant for a license to conduct internet fantasy 16 sports contests shall complete and sign an application on 17 the form prescribed and published by the commission. The 18 application shall include such information of the applicant 19 that the commission deems necessary for purposes of issuing a 20 license pursuant to this chapter. 21 2. An applicant shall submit fingerprints and information 22 that the commission deems necessary to the commission in the 23 manner prescribed on the application forms. The fingerprints 24 may be submitted to the federal bureau of investigation by the 25 department of public safety through the state criminal history 26 repository for the purpose of a national criminal history 27 check. 28 3. The commission shall charge the applicant a fee set 29 by the department of public safety, division of criminal 30 investigation, to defray the costs associated with any 31 investigations conducted pursuant to the requirements of this 32 section concerning the applicant. This fee is in addition 33 to any other license fee charged by the commission. The fee 34 may be retained by the department of public safety, division 35 -3- LSB 1635YC (3) 87 ec/nh 3/ 13
H.F. _____ of criminal investigation, and shall be considered repayment 1 receipts as defined in section 8.2. 2 4. A license shall not be granted to an applicant if there 3 is substantial evidence that any of the following apply: 4 a. A license issued to the applicant to conduct internet 5 fantasy sports contests in another jurisdiction has been 6 revoked by an entity licensing persons to conduct such contests 7 in that jurisdiction. 8 b. The applicant has not demonstrated financial 9 responsibility sufficient to adequately meet the requirements 10 of the enterprise proposed. 11 c. The applicant does not adequately disclose the true 12 owners of the enterprise proposed. 13 d. The applicant has knowingly made a false statement of a 14 material fact to the commission. 15 e. The applicant has failed to meet a monetary obligation in 16 connection with conducting an internet fantasy sports contest. 17 f. The applicant is not of good repute and moral character 18 or the applicant has pled guilty to, or has been convicted of, 19 a felony. 20 g. Any member of the board of directors of the applicant is 21 not twenty-one years of age or older. 22 5. A person who knowingly makes a false statement on the 23 application is guilty of an aggravated misdemeanor. 24 6. For the purposes of this section, “applicant” includes 25 each member of the board of directors of an internet fantasy 26 sports contest service provider. 27 Sec. 5. NEW SECTION . 99E.5 Licenses —— fees —— terms and 28 conditions —— revocation. 29 1. If the commission is satisfied that the requirements 30 of this chapter and its rules adopted under this chapter 31 applicable to licensees have been or will be complied with, the 32 commission shall issue a license for a period of not more than 33 three years to an applicant to conduct internet fantasy sports 34 contests in this state. 35 -4- LSB 1635YC (3) 87 ec/nh 4/ 13
H.F. _____ 2. A licensed internet fantasy sports contest service 1 provider shall comply with all of the following requirements: 2 a. Prevent employees of the internet fantasy sports contest 3 service provider and family members related within the second 4 degree of affinity or consanguinity of such employees from 5 competing in any internet fantasy sports contest conducted by 6 any service provider in which the service provider offers a 7 cash prize over five dollars. 8 b. Verify that an internet fantasy sports contest player 9 located in this state is twenty-one years of age or older. 10 c. Ensure that coaches, officials, players, contestants, 11 or other individuals who participate in a game or contest 12 that is the subject of an internet fantasy sports contest are 13 restricted from entering an internet fantasy sports contest in 14 which the outcome is determined, in whole or in part, by the 15 accumulated statistical results of a team of individuals in the 16 game or contest in which they participate. 17 d. Prohibit internet fantasy sports contests based upon any 18 extracurricular interscholastic athletic contest or competition 19 which is sponsored or administered by an organization as 20 defined in section 280.13, any amateur athletic contest or 21 competition in which all participants are under the age of 22 twenty-one, or any intercollegiate sport as defined in section 23 9A.102. 24 e. Allow individuals to restrict themselves from entering 25 an internet fantasy sports contest conducted by the internet 26 fantasy sports contest service provider upon request and take 27 reasonable steps to prevent those individuals from entering 28 any internet fantasy sports contests conducted by the internet 29 fantasy sports contest service provider. 30 f. Disclose the number of entries a single internet fantasy 31 sports contest player may submit to each internet fantasy 32 sports contest and take reasonable steps to prevent players 33 from submitting more than the allowable number of entries for 34 that internet fantasy sports contest. 35 -5- LSB 1635YC (3) 87 ec/nh 5/ 13
H.F. _____ g. Segregate internet fantasy sports contest player funds 1 from operational funds and maintain a reserve in the form 2 of cash, cash equivalents, an irrevocable letter of credit, 3 payment processor reserves and receivables, a bond, or a 4 combination thereof in the amount of the deposits in internet 5 fantasy sports contest player accounts for the benefit and 6 protection of internet fantasy sports contest player funds held 7 in internet fantasy sports contest accounts by the internet 8 fantasy sports contest service provider. 9 h. Annually contract with a third party to perform an 10 independent audit, consistent with the standards established 11 by the American institute of certified public accountants, 12 to ensure compliance with all of the requirements in this 13 chapter and submit the results of the independent audit to the 14 commission. 15 i. Pay the tax as provided in section 99E.6. 16 3. The annual license fee to conduct internet fantasy sports 17 contests shall be five hundred dollars. Moneys collected by 18 the commission from the annual license fee paid under this 19 subsection shall be considered repayment receipts as defined 20 in section 8.2. 21 4. Upon a violation of any of the conditions listed in 22 section 99E.4 or this section by a licensee, the commission 23 shall immediately revoke the license. 24 Sec. 6. NEW SECTION . 99E.6 Internet fantasy sports contest 25 tax —— rate —— allocations. 26 1. A tax of seven and one-half percent is imposed on 27 internet fantasy sports contest adjusted revenues. The tax 28 imposed by this section shall be paid by the internet fantasy 29 sports contest service provider to the commission as provided 30 by the commission. 31 2. Of the revenues collected pursuant to this section, an 32 amount equal to one-half of one percent of internet fantasy 33 sports contest adjusted revenues is appropriated to the 34 department of public health for purposes of the gambling 35 -6- LSB 1635YC (3) 87 ec/nh 6/ 13
H.F. _____ treatment program established pursuant to section 135.150. The 1 remaining amount of the revenues collected pursuant to this 2 section shall be deposited in the rebuild Iowa infrastructure 3 fund created in section 8.57. 4 Sec. 7. NEW SECTION . 99E.7 Internet fantasy sports contests 5 —— age restrictions. 6 A person under the age of twenty-one years shall not enter an 7 internet fantasy sports contest. A person who violates this 8 section with respect to entering an internet fantasy sports 9 contest commits a scheduled violation under section 805.8C, 10 subsection 11. 11 Sec. 8. NEW SECTION . 99E.8 Division of criminal 12 investigation. 13 The division of criminal investigation of the department of 14 public safety may investigate to determine licensee compliance 15 with the requirements of this chapter . Investigations may be 16 conducted either on the criminal investigation division’s own 17 initiative or at the request of the commission. The criminal 18 investigation division and the commission shall cooperate to 19 the maximum extent possible on an investigation. 20 Sec. 9. NEW SECTION . 99E.9 Setoff. 21 1. A licensee or a person acting on behalf of a licensee 22 shall be provided electronic access to the names of the 23 persons indebted to a claimant agency pursuant to the process 24 established pursuant to section 99E.3, subsection 5 . The 25 electronic access provided by the claimant agency shall 26 include access to the names of the debtors, their social 27 security numbers, and any other information that assists the 28 licensee in identifying the debtors. If an internet fantasy 29 sports contest player located in this state makes an account 30 balance withdrawal equal to one thousand two hundred dollars 31 or greater, the licensee shall perform an electronic records 32 search of persons indebted to a claimant agency. If the name 33 of the internet fantasy sports contest player is retrieved by 34 the licensee pursuant to the records search, the retrieval of 35 -7- LSB 1635YC (3) 87 ec/nh 7/ 13
H.F. _____ such a name shall constitute a valid lien upon and claim of 1 lien against the account balance withdrawal of the internet 2 fantasy sports contest player whose name is electronically 3 retrieved from the claimant agency. If an internet fantasy 4 sports contest player’s account balance withdrawal is equal 5 to or greater than one thousand two hundred dollars per 6 occurrence, the full amount of the debt shall be collectible 7 from any account balance withdrawal due the internet fantasy 8 sports contest player without regard to limitations on the 9 amounts that may be collectible in increments through setoff or 10 other proceedings. 11 2. The licensee is authorized and directed to withhold 12 any account balance withdrawal of an internet fantasy sports 13 contest player which is paid out directly by the licensee 14 subject to the lien created by this section and provide notice 15 of such withholding to the internet fantasy sports contest 16 player making the account balance withdrawal. The licensee 17 shall pay the funds over to the collection entity which 18 administers the setoff program pursuant to section 8A.504 . 19 3. Notwithstanding any other provision of law to the 20 contrary, the licensee may provide to a claimant agency all 21 information necessary to accomplish and effectuate the intent 22 of this section , and likewise the claimant agency may provide 23 all information necessary to accomplish and effectuate the 24 intent of this section . 25 4. The information obtained by a claimant agency from the 26 licensee in accordance with this section shall retain its 27 confidentiality and shall only be used by a claimant agency in 28 the pursuit of its debt collection duties and practices. An 29 employee or prior employee of a claimant agency who unlawfully 30 discloses any such information for any other purpose, except 31 as otherwise specifically authorized by law, shall be subject 32 to the penalties specified by law for unauthorized disclosure 33 of confidential information by an agent or employee of the 34 claimant agency. 35 -8- LSB 1635YC (3) 87 ec/nh 8/ 13
H.F. _____ 5. The information obtained by a licensee from a claimant 1 agency in accordance with this section shall retain its 2 confidentiality and only be used by the licensee in the 3 pursuit of debt collection duties and practices. An employee 4 or prior employee of a licensee who unlawfully discloses any 5 such information for any other purpose, except as otherwise 6 specifically authorized by law, shall be subject to the 7 same penalties specified by law for unauthorized disclosure 8 of confidential information by an agent or employee of the 9 licensee. 10 6. Except as otherwise provided in this chapter , 11 attachments, setoffs, or executions authorized and issued 12 pursuant to law shall be withheld if timely served upon the 13 licensee. 14 7. A claimant agency or licensee, acting in good faith, 15 shall not be liable to any person for actions taken pursuant to 16 this section . 17 Sec. 10. NEW SECTION . 99E.10 Penalties. 18 In addition to any other penalty specified in this chapter, 19 a person who willfully fails to comply with the requirements 20 of this chapter and the rules adopted pursuant to chapter 17A 21 commits a class “D” felony and, in addition, shall be barred 22 for life from internet fantasy sports contests. 23 Sec. 11. Section 232C.4, subsection 3, Code 2017, is amended 24 to read as follows: 25 3. An emancipated minor shall remain subject to voting 26 restrictions under chapter 48A , gambling restrictions under 27 chapter 99B , 99D , 99F , 99G , or 725 , internet fantasy sports 28 contest restrictions under chapter 99E, alcohol restrictions 29 under chapter 123 , compulsory attendance requirements under 30 chapter 299 , and cigarette tobacco restrictions under chapter 31 453A . 32 Sec. 12. Section 714B.10, subsection 1, Code 2017, is 33 amended to read as follows: 34 1. Advertising by sponsors registered pursuant to chapter 35 -9- LSB 1635YC (3) 87 ec/nh 9/ 13
H.F. _____ 557B , licensed pursuant to chapter 99B , or regulated pursuant 1 to chapter 99D , 99E, 99F , or 99G . 2 Sec. 13. Section 805.8C, Code 2017, is amended by adding the 3 following new subsection: 4 NEW SUBSECTION . 11. Internet fantasy sports contest 5 violations. For violations of legal age for entering an 6 internet fantasy sports contest under section 99E.7, the 7 scheduled fine is five hundred dollars. Failure to pay the 8 fine by a person under the age of eighteen shall not result in 9 the person being detained in a secure facility. 10 Sec. 14. IMPLEMENTATION DATE. The following provision or 11 provisions of this Act shall not be implemented until July 1, 12 2019: 13 1. The section of this Act enacting section 99E.9. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill authorizes internet fantasy sports contests 18 and provides for the licensing, regulation, and taxation of 19 internet fantasy sports contests. 20 New Code section 99E.1 provides for definitions. A “fantasy 21 sports contest” is defined as any fantasy or simulated game 22 or contest in which all prizes and awards offered to winning 23 participants are established and made known in advance of the 24 contest, all winning outcomes reflect the relative knowledge 25 and skill of the participants and are determined predominantly 26 by accumulated statistical results of the performance of 27 individuals in a fully completed game or contest, and no 28 winning outcome is based on the score, or performance of any 29 single actual team or combination of such teams or solely on 30 any single performance of an individual athlete in any single 31 actual sporting or other event. An “internet fantasy sports 32 contest” is defined as a method of entering a fantasy sports 33 contest by establishing an account with an internet fantasy 34 sports contest service provider. An “internet fantasy sports 35 -10- LSB 1635YC (3) 87 ec/nh 10/ 13
H.F. _____ contest player” is defined as a person who is at least 21 years 1 of age who participates in an internet fantasy sports contest. 2 The bill also defines internet fantasy sports contest adjusted 3 revenues, internet fantasy sports contest service provider, and 4 location percentage. 5 New Code section 99E.2 provides that the system of entering 6 an internet fantasy sports contest is legal when conducted by a 7 licensed internet fantasy sports contest service provider as 8 provided in the new Code chapter. 9 New Code section 99E.3 establishes the powers of the racing 10 and gaming commission in relation to internet fantasy sports 11 contests and internet fantasy sports contest service providers. 12 Specifically, the new Code section authorizes the commission to 13 investigate and license internet fantasy sports contest service 14 providers, assess fines and revoke or suspend licenses, and 15 take any other action to enforce the requirements of the new 16 Code chapter. 17 New Code section 99E.4 establishes the requirements for an 18 applicant to be granted a license to conduct internet fantasy 19 sports contests. The Code section allows the commission 20 to charge the applicant a fee for the department of public 21 safety, division of criminal investigation, to defray the 22 costs associated with any investigation. The new Code 23 section provides that a license shall not be issued if there 24 is evidence that the applicant has failed to meet certain 25 qualifying requirements. A person who knowingly makes a 26 false statement on the application is guilty of an aggravated 27 misdemeanor. 28 New Code section 99E.5 establishes the terms and conditions 29 of licenses issued to conduct internet fantasy sports contests. 30 The Code section provides that a license may be issued for 31 a period of not more than three years and provides that 32 the annual license fee shall be $500. The new Code section 33 provides that a licensed internet fantasy sports contest 34 service provider shall prevent any employees and certain family 35 -11- LSB 1635YC (3) 87 ec/nh 11/ 13
H.F. _____ members from participating in internet fantasy sports contests, 1 verify that internet fantasy sports contest players located 2 in this state are 21 or older, ensure that participants in 3 a game or contest shall not be allowed to enter an internet 4 fantasy sports contest involving that game or contest, prohibit 5 internet fantasy sports contests based upon any interscholastic 6 or intercollegiate athletic contest or any amateur athletic 7 contest or competition in which all participants are under 8 the age of 21, permit individuals to restrict themselves 9 from entering an internet fantasy sports contest, perform an 10 independent audit, and pay the tax imposed by the new Code 11 chapter. 12 New Code section 99E.6 provides for a tax of 7.5 percent 13 to be imposed on internet fantasy sports contest adjusted 14 revenues. The bill defines, in new Code section 99E.1, 15 internet fantasy sports contest adjusted revenues as the 16 total of fees and charges collected, less winnings, in an 17 internet fantasy sports contest multiplied by the percentage 18 of fees and charges paid by participants who are located in 19 this state in that contest. The bill provides that of the 20 revenues collected, an amount equal to .5 percent of internet 21 fantasy sports contest adjusted revenues is appropriated to the 22 department of public health for gambling treatment with the 23 remainder of revenues collected to be deposited in the rebuild 24 Iowa infrastructure fund. 25 New Code section 99E.7 provides that a person under the 26 age of 21 shall not enter an internet fantasy sports contest. 27 A person who violates this Code section commits a scheduled 28 violation under Code section 805.8C and is subject to a $500 29 fine. Code section 805.8C is amended to reflect this violation 30 and applicable fine. 31 New Code section 99E.8 authorizes the division of criminal 32 investigation of the department of public safety to investigate 33 licensee compliance with the requirements of the new Code 34 chapter. 35 -12- LSB 1635YC (3) 87 ec/nh 12/ 13
H.F. _____ New Code section 99E.9 requires a licensee to offset 1 account balance withdrawals of an internet fantasy sports 2 contest player who is a debtor in an amount equal to or greater 3 than $1,200, subject to the requirements of this new Code 4 section. The bill provides that this Code section shall not be 5 implemented until July 1, 2019. 6 New Code section 99E.10 provides that, in addition to any 7 other penalty specified in the new Code chapter, a person who 8 willfully fails to comply with the requirements of the Code 9 chapter commits a class “D” felony and shall be barred for life 10 from internet fantasy sports contests. 11 Code section 232C.4, concerning emancipation orders and 12 minors, is amended to reflect that an emancipated minor is 13 subject to the age restrictions for internet fantasy sports 14 contests. 15 Code section 714B.10, concerning prize promotions, is 16 amended to exempt internet fantasy sports contests from the 17 Code chapter. 18 -13- LSB 1635YC (3) 87 ec/nh 13/ 13