Bill Text: MI HB4308 | 2019-2020 | 100th Legislature | Enrolled
Bill Title: Gaming: other; fantasy contests consumer protection act; create. Creates new act.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2019-12-31 - Assigned Pa 157'19 With Immediate Effect [HB4308 Detail]
Download: Michigan-2019-HB4308-Enrolled.html
state of michigan
100th Legislature
Regular session of 2019
Introduced by Rep. Iden
ENROLLED HOUSE BILL No. 4308
AN ACT to regulate the conduct of fantasy
contests; to protect Michigan participants in fantasy contests; to require
licensing of the operators of fantasy contests; to impose fees on the operators
of fantasy contests; to provide for the powers and duties of certain state
governmental officers and entities; to create the fantasy contest fund; to
prohibit violations of this act; to prescribe civil sanctions; and to prescribe
penalties.
The People of the State of Michigan enact:
Sec. 1. This act shall be known and may be
cited as the “fantasy contests consumer protection act”.
Sec. 2. As used in this act:
(a) “Athletic event” means a real world
professional, collegiate, or nationally recognized sports game, contest, or
competition that involves the physical exertion and skill of the participating
individual athletes, as to which each participant is physically present at the
location in which the sports game, contest, or competition occurs, and the
outcome of the sports game, contest, or competition is directly dependent on
the performance of the participating athletes.
(b) “Board” means the Michigan gaming control
board created under section 4 of the Michigan Gaming Control and Revenue Act,
1996 IL 1, MCL 432.204.
(c) “Entry fee” means cash or cash equivalent
paid by a participant to a fantasy contest operator in order to participate in
a fantasy contest.
(d) “Fantasy contest” means a simulated game
or contest with an entry fee that meets all of the following conditions:
(i) No
fantasy contest team is composed of the entire roster of a real world sports
team.
(ii) No
fantasy contest team is composed entirely of individual athletes who are
members of the same real world sports team.
(iii)
Each prize and award or the value of all prizes and awards offered to winning
fantasy contest players is made known to the fantasy contest players in advance
of the fantasy contest.
(iv) Each
winning outcome reflects the relative knowledge and skill of the fantasy
contest players and are determined by the aggregated statistical results of the
performance of multiple individual athletes selected by the fantasy contest
player to form the fantasy contest team, whose individual performances in the
fantasy contest directly correspond with the actual performance of those
athletes in the athletic event in which those individual athletes participated.
(v) A winning outcome is not based
on randomized or historical events, or on the score, point spread, or
performance in an athletic event of a single real-world sports team, a single
athlete, or any combination of real-world sports teams.
(vi) The fantasy contest does not
constitute or involve and is not based on any of the following:
(A) Racing involving animals.
(B) A game or contest ordinarily offered by a horse track or casino for
money, credit, or any representative of value, including any races, games, or
contests involving horses or that are played with cards or dice.
(C) A slot machine or other mechanical, electromechanical, or electronic
device, equipment, or machine, including computers and other cashless wagering
systems.
(D) Poker, blackjack, faro, monte, keno, bingo, fan tan, twenty one,
seven and a half, Klondike, craps, chuck a luck, Chinese chuck a luck, Wheel of
Fortune, Chemin de Fer, Baccarat, Pai Gow, Beat the Banker, Panguingui,
roulette, or other banking or percentage games.
(E) Any other game or device authorized by the board under the Michigan
Gaming Control and Revenue Act, 1996 IL 1, MCL 432.201 to 432.226.
(vii) A fantasy contest is not
based on a high school or youth sporting event or any event that is not an
athletic event.
(viii) A fantasy contest is not
conducted in a manner that involves or results in betting on a race, game,
contest, or on sports.
(e) “Fantasy contest adjusted revenues” means the amount equal to the
total of all entry fees that a fantasy contest operator collects from all
fantasy contest players minus the total of all sums paid out as prizes or
awards to all fantasy contest players, multiplied by the in-state percentage.
(f) “Fantasy contest operator” means a person that operates, carries on,
conducts, maintains, exposes, or offers for play fantasy contests and awards
prizes of value and includes a licensed fantasy contest operator, a casino
licensee under the Michigan Gaming Control and Revenue Act, 1996 IL 1, MCL
432.201 to 432.226, and a federally recognized Indian tribe licensed under the
lawful internet gaming act or the lawful sports betting act.
(g) “Fantasy contest platform” means any digital or online method
through which a fantasy contest operator provides access to a fantasy contest.
(h) “Fantasy contest player” means an individual who participates in a
fantasy contest offered by a fantasy contest operator.
(i) “Fantasy contest team” means the simulated team composed of multiple
individual athletes, each of whom is a member of a real world sports team, that
a fantasy contest player selects to compete in a fantasy contest.
(j) “Highly experienced player” means a fantasy contest player who has
done at least 1 of the following:
(i) Entered more than 1,000 fantasy
contests offered by a single fantasy contest operator.
(ii) Won more than 3 prizes valued
at $1,000.00 each or more from a single fantasy contest operator.
(k) “Holding company” means a corporation, firm, partnership, limited
partnership, limited liability company, trust, or other form of business organization
that is not an individual and that directly or indirectly does either of the
following:
(i) Holds an ownership interest of
5% or more, as determined by the board, in a fantasy contest operator.
(ii) Holds voting rights with the
power to vote 5% or more of the outstanding voting rights of a fantasy contest
operator.
(l) “In-state percentage” means for each fantasy
contest, the percentage, rounded to the nearest tenth of a percent, equal to
the total entry fees collected from all in-state participants divided by the
total entry fees collected from all participants in the fantasy contest, unless
otherwise prescribed by the board.
(m) “Key employee” means an employee of a fantasy contest operator who
has the power to exercise significant influence over decisions concerning the
fantasy contest operator.
(n) “Licensed fantasy contest operator” means a fantasy contest operator
that is licensed by the board under this act.
(o) “Management company” means a person retained by a fantasy contest
operator to manage a fantasy contest platform and provide general
administration and other operational services.
(p) “Person” means an individual, partnership, corporation, association,
limited liability company, federally recognized Indian tribe, or other legal
entity.
(q) “Prize or award” means anything of value or any amount of cash or
cash equivalents.
(r) “Protected information” means information related to the playing of
fantasy contests by fantasy contest players that is obtained by a fantasy
contest operator.
(s) “Script” means a list of commands that a fantasy-contest-related
computer program can execute and that is created by a fantasy contest player,
or by a third party for a fantasy contest player, to automate processes on a
fantasy contest platform.
Sec. 3. (1) Except as otherwise provided in this section, a person shall
not offer fantasy contests in this state unless the person is a licensed
fantasy contest operator.
(2) An individual may offer, solely from his or her private residence, 1
or more fantasy contests, if none of the contests are made available to the
general public, each of the contests is limited to no more than 15 total
fantasy contest players, and the individual collects no more than $10,000.00 in
total entry fees for all fantasy contests offered in a calendar year, at least
95% of which entry fees are awarded to the fantasy contest players.
(3) A person that met the definition of fantasy contest operator in this
state on May 1, 2018 may continue offering fantasy contests until the fantasy
contest operator is issued or denied a license under this act if the person
applies for a license within 60 days after the date the application for the
license is made available by the board.
(4) Both of the following may offer and conduct fantasy contests without
applying for or holding a license under this act:
(a) A casino licensee licensed by the board under the Michigan Gaming
Control and Revenue Act, 1996 IL 1, MCL 432.201 to 432.226.
(b) An Indian tribe that lawfully conducts class III gaming in a casino
located in this state under a facility license issued in accordance with a
tribal gaming ordinance approved by the chair of the National Indian Gaming
Commission and is licensed under the lawful sports betting act or the lawful
internet gaming act. As used in this subdivision, “class III gaming” means that
term as defined in 25 USC 2703.
(5) To ensure the integrity of fantasy contests, the board has
jurisdiction over each person involved in the conduct of a fantasy contest. The
board may promulgate rules related to the conduct of fantasy contests,
including rules setting forth penalties for violations of this act or any rules
promulgated under this act.
(6) A person seeking to be licensed as a fantasy contest operator shall
submit an application, with the license fee under subsection (9), to the board.
The applicant shall provide sufficient documentation to the board to ensure
that the applicant meets the requirements for licensure as determined by the
board, including, but not limited to, documentation of all of the following:
(a) The name of the applicant.
(b) The location of the applicant’s principal place of business.
(c) The applicant’s telephone number.
(d) The applicant’s Social Security number or, if applicable, the
applicant’s federal tax identification number.
(e) The name and address of each person that holds a 5% or greater
ownership interest in the applicant or in shares of the applicant.
(f) The applicant’s criminal record, if any, or, if the applicant is a
business entity, any criminal record of an individual who is a director,
officer, or key employee of, or who has a 5% or greater ownership interest in,
the applicant.
(g) Any ownership interest that a director, officer, key employee, or
individual owner of 5% or greater of the applicant holds in a person that is or
was a fantasy contest operator or similar entity in any jurisdiction.
(h) 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 5% or greater, has an equity
interest of 5% or more.
(i) Whether an applicant, director, officer, key employee, or individual
owner of 5% or greater has ever applied for or been granted any license,
registration, or certificate issued by a licensing authority in this state or
any other jurisdiction.
(j) Whether an applicant, director, officer, key employee, or individual
owner of 5% or greater 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, the type of tax, the taxing agency,
and the time periods involved.
(k) A description of any physical facility operated by the applicant in
this state, the employees who work at the facility, and the nature of the
business conducted at the facility.
(l) Information sufficient to show,
as determined by the board, that the applicant can meet the requirements of
procedures submitted by the applicant under this act and under any rules
promulgated under this act.
(7) The board may require licensure of a holding company, management
company, or any other person it considers sufficiently connected to the fantasy
contest operator if that licensure is necessary to preserve the integrity of
fantasy contests and protect fantasy contest players.
(8) A license issued under this section is
valid for 1 year. The board shall renew a license each year if the applicant
demonstrates continued eligibility for licensure under this act and pays the
renewal fee. Notwithstanding this subsection, the board may investigate a
licensee at any time the board determines it is necessary to ensure that the
licensee remains in compliance with this act and the rules promulgated under
this act.
(9) The initial license fee is $10,000.00. The
annual license renewal fee is $5,000.00. The board may assess investigative
costs if the cost of a licensure investigation exceeds the amount of the
initial license or renewal fee.
Sec. 4. (1) As a condition of licensure, a
fantasy contest operator must submit to, and receive approval from, the board
commercially reasonable procedures and internal controls intended to accomplish
all of the following:
(a) Prevent the fantasy contest operator, its
owners, directors, officers, and employees, and any relative of any of these
individuals living in the same household, from participating in a fantasy
contest other than a fantasy contest offered by the fantasy contest operator
for which participation is limited to the persons described in this
subdivision.
(b) Prevent the employees or agents of the
fantasy contest operator from sharing protected information with third parties
unless the protected information is otherwise made publicly available.
(c) Prevent participants and officials in an
athletic event from participating in a fantasy contest that is based on the
athletic event.
(d) Establish the number of entries a single
fantasy contest player may enter in a single fantasy contest and take
reasonable steps to prevent fantasy contest players from submitting more than
the allowable number of entries.
(e) Identify each highly experienced player by
a symbol attached to the highly experienced player’s username.
(f) Offer some fantasy contests that are open
only to players other than highly experienced players.
(g) Either of the following:
(i)
Segregate the deposits in the fantasy contest players’ accounts from
operational money.
(ii)
Maintain a reserve in the form of cash, cash equivalents, an irrevocable letter
of credit, a bond, or a combination of these, the aggregate amount of which
exceeds the total dollar value amount of deposits in the fantasy contest
players’ accounts, and which reserve must not be used for operational
activities.
(h) Ensure compliance with the applicable
state and federal requirements to protect the privacy and online security of a
fantasy contest player and the fantasy contest player’s account.
(i) Otherwise ensure the integrity of fantasy
contests.
(2) A licensed fantasy contest operator shall
comply with the procedures and internal controls that are submitted to the
board under subsection (1) and approved by the board. A licensed fantasy
contest operator may make technical adjustments to its procedures and internal
controls if the adjustments are not material and it notifies the board in
advance and continues to meet or exceed the standards required by this act and
any rules promulgated by the board.
(3) Procedures submitted to the board under
subsection (1) are confidential and privileged, are not subject to disclosure
under the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, are
not subject to subpoena, and are not subject to discovery or admissible in
evidence in a private civil action.
Sec. 5. By July 1 of each year, a licensed
fantasy contest operator shall contract with a certified public accountant to
perform an independent audit in accordance with generally accepted accounting
principles of the financial condition of the licensed fantasy contest
operator’s total operations for the previous fiscal year and to ensure
compliance with section 4(1)(g) and for any other purpose the board considers
appropriate. A licensed fantasy contest operator shall submit the audit results
under this section to the board not later than 180 days after the end of the
fantasy contest operator’s fiscal year. The results of an audit submitted to
the board under this section is confidential and privileged, is not subject to
disclosure under the freedom of information act, 1976 PA 442, MCL 15.231 to
15.246, is not subject to subpoena, and is not subject to discovery or
admissible in evidence in a private civil action.
Sec. 6. A fantasy contest operator shall
prohibit an individual who is less than 18 years of age from participating in a
fantasy contest.
Sec. 7. A licensed fantasy contest operator
shall not do any of the following:
(a) Allow the use of a script unless the
script is made readily available to all fantasy contest players.
(b) Employ false, deceptive, or misleading advertising, or advertising
that is not based on fact.
(c) Target, in advertising or promotions, either of the following:
(i) Individuals who have restricted
themselves from entering a fantasy contest under the procedures established by
the board.
(ii) Individuals who are less than
18 years of age.
Sec. 8. (1) A fantasy contest must not be offered on, at, or from any of
the following:
(a) A kiosk or machine physically located in a retail business location,
bar, restaurant, or other commercial establishment.
(b) A place of public accommodation.
(c) A facility owned, operated, or occupied by a private club,
association, or similar membership-based organization.
(2) This section does not apply to a casino licensee licensed by the
board under the Michigan Gaming Control and Revenue Act, 1996 IL 1, 432.201 to
432.226, or a federally recognized Indian tribe licensed under the lawful
internet gaming act or the lawful sports betting act.
Sec. 9. (1) A licensed fantasy contest operator shall make available on
the licensed fantasy contest operator’s website information about resources
relating to compulsive gaming behavior including a telephone number or link to
information on compulsive gaming behavior and where to seek assistance for
compulsive gaming behavior.
(2) A licensed fantasy contest operator shall make available, by
website, telephone, or online chat, a means to allow an individual to
irrevocably restrict the individual’s ability to enter a fantasy contest and to
select the length of time the restriction will be in effect.
(3) A licensed fantasy contest operator shall offer a fantasy contest
player access to the fantasy contest player’s playing history, including a
summary of entry fees expended, games played, previous lineups, and prizes
awarded.
Sec. 10. The board shall promulgate rules to implement this act under
the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328,
including, but not limited to, rules that address all of the following:
(a) Requiring a fantasy contest operator to implement commercially
reasonable procedures to prohibit access to both of the following:
(i) Individuals who request to
restrict themselves from playing fantasy contests.
(ii) Individuals who are less than
18 years of age.
(b) Prescribing requirements related to beginning players and highly
experienced players.
(c) Suspending the account of a fantasy contest player who violates this
act or a rule promulgated under this act.
(d) Providing a fantasy contest player with access to information on
playing responsibly and how to ask for assistance for compulsive gaming
behavior.
(e) Requiring an applicant for a fantasy contest operator license to
designate at least 1 key employee as a condition for obtaining a license.
(f) Any other rule the board determines is necessary to ensure the
integrity of fantasy contests.
Sec. 11. (1) A licensed fantasy contest operator shall retain and
maintain in a place secure from theft, loss, or destruction all of the records
required to be maintained under this act and the rules promulgated under this
act for at least 3 years after the date of the record’s creation.
(2) A licensed fantasy contest operator shall organize all records under
subsection (1) in a manner that enables the licensed fantasy contest operator
to provide the board with the records.
(3) Information obtained under this section is confidential and
privileged, is not subject to disclosure under the freedom of information act,
1976 PA 442, MCL 15.231 to 15.246, is not subject to subpoena, and is not
subject to discovery or admissible as evidence in a private civil action.
Sec. 12. (1) The board may suspend, revoke, or restrict the license of a
fantasy contest operator that violates this act, a rule promulgated under this
act, or an order of the board.
(2) The board may impose a civil fine of not more than $20,000.00 for a
violation of this act, a rule promulgated under this act, or an order of the
board.
(3) A civil fine imposed under this section is
payable to this state and may be recovered in a civil action brought by the
board.
Sec. 13. (1) A person shall not do any of the following:
(a) Except as otherwise provided in section 3,
offer a fantasy contest in this state unless the person is licensed by the
board.
(b) Knowingly make a false statement on an
application for a license to be issued under this act.
(c) Knowingly provide false testimony to the
board or any authorized representative of the board while under oath.
(2) The board shall not issue a license under
this act to a person that violates subsection (1).
(3) A person who violates subsection (1)(a) is
guilty of a crime as follows:
(a) For the first or second violation, the
person is guilty of a misdemeanor punishable by imprisonment for not more than
1 year or a fine of not more than $10,000.00, or both.
(b) For a third or subsequent violation, the
person is guilty of a felony punishable by imprisonment for not more than 5
years or a fine of not more than $50,000.00, or both.
(4) The board may issue a cease and desist
order and obtain injunctive relief against a person that violates this act.
Sec. 14. (1) A fantasy contest operator shall
report to the board and pay from its monthly fantasy contest adjusted revenues,
on a form and in the manner prescribed by the board, a tax of 8.4% of its
monthly fantasy contest adjusted revenues. This subsection does not apply to a
person running a contest solely from his or her private residence under section
3(2).
(2) The tax imposed under subsection (1) must
be payable to the board by the twentieth day of each month and must be based on
monthly fantasy contest adjusted revenue derived during the previous month.
(3) The tax imposed and collected by the board
under subsection (1) must be deposited into the fantasy contest fund created
under section 16.
(4) A licensed fantasy contest operator who
fails to remit to the board the tax imposed under this section is liable, in
addition to any sanction or penalty imposed under this act, for the payment of
a penalty of 5% per month up to a maximum of 25% of the amounts ultimately
found to be due, to be recovered by the board. Penalties imposed and collected
by the board under this subsection must be deposited into the state school aid
fund established under section 11 of article IX of the state constitution of
1963.
Sec. 15. A fantasy contest conducted under
this act does not violate the Michigan penal code, 1931 PA 328, MCL 750.1 to
750.568. This act does not create an exemption to a violation of chapter XLIV
of the Michigan penal code, 1931 PA 328, MCL 750.301 to 750.315a.
Sec. 16. (1) The fantasy contest fund is
created in the department of treasury.
(2) The state treasurer may receive money or
other assets required to be paid into the fund under this act or from any other
source for deposit into the fund. The state treasurer shall direct the
investment of the fund. The state treasurer shall credit to the fund interest
and earnings from fund investments.
(3) The board shall expend money from the
fund, on appropriation, for all of the following:
(a) The board’s costs of regulating and
enforcing fantasy contests under this act.
(b) All money remaining in the fund after the
expenditures under subdivision (a) is to be deposited into the state school aid
fund established under section 11 of article IX of the state constitution of
1963.
This act is ordered to take immediate effect.
Clerk of the House of Representatives
Secretary of the Senate
Approved___________________________________________
____________________________________________________
Governor
