Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                  Introduced House Bill 5667                             FISCAL
                                                        NOTE
  By Delegates Cannon, Chiarelli, Smith, Willis, and Maynor [Introduced February 13, 2024; Referred to the Committee on Technology and Infrastructure]
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  A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article,
            designated §29-22F-1, §29-22F-2, §29-22F-3, §29-22F-4, §29-22F-5, §29-22F-6, §29-
            22F-7, §29-22F-8, §29-22F-9, and §29-22F-10 all relating to permitting the operation of
            daily fantasy sports contests in which participants own, manage, or coach imaginary teams
            in competition against the operator responsible for creating, administering or operating
            such contest; defining terms; detailing duties and powers of the West Virginia Lottery
            Commission; providing rule-making authority and emergency rule-making authority;
            establishing license requirements and prohibitions; defining duties of an operator
            conducting daily fantasy sports contests; authorizing Lottery Commission to collect
           licensing fees for daily fantasy sports contest operators; requiring independent audits of
           daily fantasy sports contests; requiring investigation of prohibited conduct and authorizing
           the reporting of same to law enforcement; authorizing the West Virginia Lottery
           Commission to levy and collect a tax on the privilege of operating daily fantasy sports
           contests of 15 percent of adjusted gross daily fantasy sports contest receipts; creating the
           West Virginia Daily Fantasy Sports Contests Fund; defining how moneys deposited in the
           West Virginia Daily Fantasy Sports Contests Fund shall be distributed; and providing for
           compulsive gaming assistance and requiring daily fantasy sports contest operators to
           provide for self-exclusion from contests.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 22F. WEST VIRGINIA DAILY FANTASY SPORTS CONTEST ACT.
     §29-22F-1.                                            Short Title.
            This article shall be known and may be cited as the West Virginia Daily Fantasy Sports
  Contest Act.
     §29-22F-2.        State authorization of        Daily Fantasy Sports Contests.
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            (a) Operation of Daily Fantasy Sports Contests. -- Notwithstanding any provision of law to
  the contrary, the operation of daily fantasy sports contests is only lawful when conducted in
  accordance with the provisions of this article.
            (b) A paid daily fantasy sports contest conducted under this article does not constitute
  gambling for any purpose, including but not limited to under the provisions of §61-10-5 of this
  code.
            (c) A person participating in a daily fantasy sports contest under this article shall be at least
  19 years of age.
            (d) A licensee under this article may only accept an entry from a person physically located
 in the State.
           (e) A licensee under this article may not offer daily fantasy sports contests on a high school
 or below sporting event.
           (f) The provisions of this article shall be construed liberally to promote the general welfare
 of the public and integrity of the fantasy sports industry: Provided, That the commission may not
 adopt rules limiting or regulating the rules or administration of an individual daily fantasy sports
 contest, the statistical makeup of a daily fantasy sports contest, or the digital platform of a daily
 fantasy sports contest operator. Furthermore, the commission may not in any way limit or restrict
 the types of daily fantasy sports contests allowed pursuant to this article, by labeling any such
 contests as sports wagering as that term is defined in this code.
           (g) No licensed daily fantasy sports contest operator shall be forced to surrender or
 terminate its license prior to the date of expiration of said license solely by virtue of a change in any
 rules promulgated pursuant to             this article.
     §29-22F-3.                                                                                   Definitions.
            (a) For the purposes of this article, the following terms have the meanings ascribed to them
  in this section:
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            (1) "Adjusted gross daily fantasy sports contest receipts" means the amount equal to the
  total of all entry fees that a daily fantasy sports operator collects from all participants less only the
  total of all prizes paid out as prizes to all participants multiplied by the location percentage for this
  State.
            (2) "Commission" or "State Lottery Commission" means the West Virginia Lottery
  Commission, created by §29-22-1 et seq. of this code.
            (3) "Entry fee" means a nonrefundable cash or cash equivalent that is paid by a participant
 and set in advance by a daily fantasy sports contest operator granting the participant the right to
 participate in a daily fantasy sports contest.
           (4) "Daily fantasy sports contest" means any online fantasy or simulated game or contest
 of skill with an Entry Fee in which:
           (A) The values of all prizes offered to a winning participant are established and made
 known to the participant in advance of the contest;
           (B) All winning outcomes reflect the relative knowledge and skill of the participant;
           (C) The participant assembles, owns, or manages a fictional entry or roster of actual
 professional or amateur athletes, in real-world sports or E-sports events; and
           (D) Competes for prizes awarded by the daily fantasy sports contest operator based on
 terms and conditions published by the daily fantasy sports operator and made known to the
 participant in advance of the contest;
           (E) Winning outcomes are determined solely by clearly-established scoring criteria based
 on one or more statistical results of the performance of an individual athlete in a real-world event or
 an E-sports event, including, but not limited to, a fantasy score; and
           (F) No winning outcome is entirely based on the score, point spread, or any performance
 of any single actual team or combination of teams or solely on any single performance of an
 individual athlete or player in any single actual event. Daily fantasy contest does not include any
 daily fantasy sports contest without an Entry Fee.
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           (5) "Director" means the Director of the West Virginia Lottery Commission.
           (6) "Large Operator" means either:
           (A) An operator, that, at the time of receiving its initial or renewed daily fantasy sports
 contest operator license has adjusted gross daily fantasy sports contests receipts greater than or
 equal to $1,000,000 for the preceding twelve months; or
           (B) An operator that, at any point, achieves ten-thousand or more daily fantasy sports
 contest participants with an active account, and who participated in at least one daily fantasy
 sports contest with an entry fee.
           (7) "Location percentage" means, for each authorized daily fantasy sports activity, the
 percentage rounded to the nearest tenth of one percent (0.1%) of the total entry fees collected
 from players located in this State, divided by the total entry fees collected from all players in the
 daily fantasy sports activity.
           (8) "Daily Fantasy Sports Contest Operator" or "Operator" shall mean a person or entity
 that offers Daily Fantasy Sports Contests to members of the public. This shall not include an
 Internet Service Provider or a provider of mobile data services merely as a result of that entity’s
 transporting general traffic that may include a Daily Fantasy Sports Contest.
           (9) "Participant" means a natural person or individual who participates in a daily fantasy
 sports contest offered by a daily fantasy sports operator.
           (10) "Qualified applicant" means an applicant for a license under this article whose
 application meets the mandatory minimum qualification criteria as required by the commission.
     §29-22F-4.                 Commission duties and powers.
            (a) In addition to the duties set forth elsewhere in this article of this code, the commission
  shall have the authority to regulate the conduct of daily fantasy sports contest operators, as
  defined under this article: Provided, That such authority shall not extend to daily fantasy sports
  contests in which participants own, manage, or coach imaginary teams in competitions against
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  other participants, and not against the individual or entity responsible for creating, administering or
  operating such contest, for a prize and/or award.
            (b) The Commission shall examine the regulations implemented in other states where
  daily fantasy sports contests are conducted and shall, as far as practicable, adopt a similar
  regulatory framework through promulgation of rules and regulations: Provided, That said rules
  and regulations adequately ensure that daily fantasy sports contest operators are suitable to offer
 daily fantasy sports contests under this article.
           (c) The Commission shall levy and collect all fees, surcharges, civil penalties, and monthly
 taxes on adjusted gross daily fantasy sports contest receipts imposed by this article.
           (d) The Commission has the authority, pursuant to §29A-1-1, et seq. and §29A-3-1, et
 seq. of this code, to promulgate or otherwise enact any legislative, interpretive, and
 procedural rules the commission considers necessary for the successful implementation,
 administration, and enforcement of this article. Rules proposed by the commission before
 December 1, 2024, may be promulgated as emergency rules pursuant to §29A-3-15 of this code.
           (e) The Commission may exercise any other powers necessary to enforce the provisions
 of this article that it regulates and the rules of the commission.
           (f) The Commission and daily fantasy sports contest operator licensees may cooperate
 with investigations conducted by law enforcement agencies, including, but not limited to, providing
 and facilitating the provision of account-level entry and participation information.
           (g) A daily fantasy sports contest operator licensee shall make all reasonable efforts to
 promptly notify the commission of any information relating to:
           (1) A confirmed breach of a relevant sports governing body's internal rules and codes of
 conduct pertaining to participation in real-money daily fantasy sports;
           (2) Any conduct that corrupts any outcome related to a sports event or sports events for
 purposes of financial gain, including match fixing; and
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           (3) Confirmed illegal activities, including use of funds derived from illegal activity, entries to
 conceal or launder funds derived from illegal activity, multiaccounting, and using false
 identification.
     §29-22F-5.                                        License required.
            (a) Except as otherwise provided in this section, a person may not offer fantasy sports
  contests in this state unless the person is first licensed by the Commission as a fantasy sports
  contest operator.
            (b) The Commission shall not grant a license required under this article to any applicant
  until the Commission has published the notice in the State Register, as required by §29-22D-15(f)
  of this code.
            (c) An applicant for a license issued under this article shall submit an application to the
  Commission in the form the Commission requires. The applicant shall submit fingerprints for a
  national criminal records check by a law enforcement agency. The fingerprints shall be furnished
 by the applicant's owners, officers, and directors (if a corporation), managers and members (if a
 limited liability company), and partners (if a partnership). The fingerprints shall be accompanied by
 a signed authorization for the release of information by the law enforcement agency. The
 Commission may require additional background checks on licensees when they apply for license
 renewal, and an applicant convicted of a disqualifying offense shall not be licensed.
           (d) The information required by the Commission shall include documentation of all of the
 following:
           (1) The name of the applicant.
           (2) The location of the applicant's principal place of business.
           (3) The applicant’s contact information.
           (4) The applicant's social security number or, if applicable, the applicant's federal tax
 identification number.
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           (5) The name and address of each individual that holds a ten percent or more ownership
 interest in the applicant or in shares of the applicant.
           (6) The applicant's criminal record, if any, or if the applicant is a business entity, on request,
 any criminal record of an individual who is a director, officer or key employee of, or any individual
 who has a ten percent or more ownership interest in, the applicant.
           (7) Any ownership interest that a director, officer, key employee or individual owner of ten
 percent or more of the applicant holds in a person that is or was a daily fantasy sports contest
 operator or similar entity in any jurisdiction.
           (8) An identification of any business, including, if applicable, the state of incorporation or
 registration, in which an applicant, director, officer, key employee or individual owner of ten percent
 or more of the applicant, has an equity interest of five percent or more.
           (9) Whether an applicant, director, officer, key employee or individual owner of ten percent
 or more of the applicant has ever applied for or been granted any license, registration or certificate
 issued by a licensing authority in this state or any other jurisdiction for a gaming activity.
           (10) Whether an applicant, director, officer, key employee or individual owner of ten
 percent or more of the applicant has filed or been served with a complaint or other notice filed by a
 public body regarding the delinquency in payment of or dispute over filings concerning the
 payment of any tax required under federal, state or local law, including the amount of tax, the type
 of tax, the taxing agency and the time periods involved.
           (11) Information sufficient to show, as determined by the commission, that the applicant
 can meet the requirements of procedures submitted by the applicant under this article and under
 any rules adopted under this article.
           (12) The commission may adopt rules to establish additional qualifications and
 requirements to preserve the integrity and security of daily fantasy sports in this State and to
 promote and maintain a competitive daily fantasy sports market.
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           (e) On receipt of a completed application and the required fee, the Commission shall
 conduct the necessary background investigation to determine if the applicant meets the
 qualifications for licensure.      On completion of the necessary background investigation, the
 Commission shall either issue a license or deny the application. If the application for licensure is
 denied, a statement setting forth the grounds for denial shall be forwarded to the applicant
 together with all other documents relied on by the Commission, to the extent allowed by law.
     §29-22F-6.             Issuance of          License;            denial of          same.
            (a) The initial license fee for an entity that, prior to the effective date of the provisions of this
  article, operated in the state daily fantasy sports contests in which participants competed against
  other participants and not the operator shall be 15% of its adjusted gross daily fantasy sports
  contest receipts from the preceding calendar year or $1,000,000, whichever is less.
            (b) The initial license fee for a fantasy contest operator that did not operate in the state for
  at least twelve months prior to the effective date of this article shall be $10,000, provided that, once
  an operator has ten-thousand or more fantasy contest participants in the state with an active
  account, and who participated in at least one fantasy contest with an entry fee, then such an
  operator shall notify the commission and remit an application fee in the amount of $990,000 within
 ten (10) days of notifying the commission.
           (c) Licenses issued by the commission shall remain in effect for four years. The
 commission shall establish a process for renewal provided that the renewal fee shall be 1% of
 adjusted gross fantasy contests receipts for the preceding four years.
           (d) Any operator applying for licensure or renewal of a license