ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY, No. 3532

 

STATE OF NEW JERSEY

 

DATED: †MARCH 20, 2017

 

††††† The Assembly Appropriations Committee reports favorably Assembly Bill No. 3532.

††††† This bill requires the Division of Consumer Affairs in the Department of Law and Public Safety to regulate fantasy sports activities in this State.

††††† The bill requires a fantasy sports operator apply to the division for a permit. The division would issue a permit if the following conditions are met:

††††† (1)† the outcome of fantasy sports activities must be determined by statistics generated based on the performance of actual individuals participating in real competitions or athletic events;

††††† (2)† all prizes offered to participants must be established and disclosed in advance;

††††† (3)† the outcome must 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;

††††† (4)† a fantasy sports operator may permit participants to use a mobile account or a participant deposit account;

††††† (5)† a casino license or licensed racetrack may use its facilities to accept entry fees and to pay prizes;

††††† (6)† a casino licensee may partner with, or enter into a contract with, one or more fantasy sports operators to offer fantasy sports activities; and

††††† (7)† a participant in a fantasy sports activity must be at least 18 years of age.

An existing fantasy sports provider would have 60 days from the billís enactment to apply for a permit, and may continue to conduct those activities pending the permitís approval.

††††† The bill also requires a fantasy sports operator to:

††††† (1)† use commercially reasonable practices to prohibit the sharing of statistical information with third parties that could affect a fantasy sports activity until that information is publicly available;

††††† (2)† adopt procedures to ensure that any prohibited participant does not participate in fantasy sports activities;

††††† (3)† adopt procedures to ensure that a fantasy sports participant is at least 18 years of age;

††††† (4)† offer individuals the ability to restrict themselves from participating in fantasy sports activities and take reasonable steps to prevent any such individual from participating in fantasy sports activities;

††††† (5)† prohibit fantasy sports activities based upon high school athletics;

††††† (6)† contract with a certified public accountant to perform a financial audit of the operator to ensure compliance with the substitute and submit the accountantís report to the division on an annual basis;

††††† (7)† disclose the number of entries a participant may submit to each fantasy sports activity and take reasonable steps to prevent a participant from exceeding that number; and

††††† (8)† segregate participantsí funds from operational funds and maintain certain monetary reserves and financial instruments in the amount of the deposits in participantsí accounts for the benefit and protection of participantsí funds.

††††† If the fantasy sports operator is a casino, all equipment used to conduct fantasy sports activities must be physically located in Atlantic City. †If the fantasy sports operator is not a casino, at least one server used to conduct fantasy sports activities must be located in that city.

††††† The bill directs the division to charge a permit fee to each fantasy sports operator applicant in an amount sufficient to cover the divisionís cost in issuing fantasy sports permits and overseeing the conduct of such activities. †A fantasy sport operator is also required to pay to the division on a quarterly basis an operations fee in an amount equal to 10.5 percent of fantasy sports gross revenue for each quarter for deposit into the general fund of the State.

††††† Finally, the bill imposes various penalties for any person who, among other actions:

††††† (1)† conducts fantasy sports activity without a permit;

††††† (2)† knowingly tampers with software, computers, or other equipment used to conduct fantasy sports activities to alter the payout of an activity or disables the activity from operating according the divisionís rules; and

††††† (3)† knowingly offers or allows to be offered any fantasy sports activity that has been tampered with in a way that affects the payout of an activity or disables the activity from operating according to the divisionís rules.

††††† The division is authorized to disqualify an operator by allowing the operator to voluntarily withdraw from the operation of fantasy sports activities, suspending the operations, or revoking the permit.

 

FISCAL IMPACT:

††††† The Office of Legislative Services estimates that the bill will produce an annual net State revenue gain of at least $6.6 million. The amount reflects $6.6 million in projected annual revenue collections from a new fee imposed on the gross revenue of fantasy sports operators plus indeterminate collections from new penalties assessed for violations of fantasy sports activity regulations.

††††† The Department of Law and Public Safety will incur an indeterminate annual increase in operating expenditures associated with the permitting and regulation of fantasy sports operators; however, the bill requires the department to set and collect permitting fees so that fee collections offset the cost of regulation.