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FISCAL NOTE
2024 REGULAR SESSION
Introduced
House Bill 5667
By Delegates Cannon, Chiarelli, Smith, Willis, and Maynor
[Introduced February 13, 2024; Referred to the Committee on Technology and Infrastructure]
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:
(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.
(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.
(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.
(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
(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.
(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.
(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.
(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.
(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.
(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 may operate during the application period unless the commission has reasonable cause to believe that such operator is or may be in violation of the provisions of this article and the commission requires such operator to suspend the operation of any fantasy contest until the license or renewal of a license is issued.
(a) As part of its submission for licensure or renewal, an applicant shall:
(1) Contract with a certified public accountant to conduct an independent audit, consistent with Generally Accepted Accounting Principles;
(2) Annually contract with a testing laboratory recognized by the commission to verify compliance with the provisions of this article; and
(3) Submit to the commission a copy of: (A) the audit report; and (B) the report of the testing laboratory.
(b) An initial applicant with adjusted gross daily fantasy sports contest receipts less than or equal to $999,999 for the twelve months preceding the month of application shall not be required to submit an audit report and report of the testing laboratory until the twenty-four months following the issuance of a licensee to such a licensee.
(a) The commission shall investigate all reasonable allegations of prohibited conduct and refer any allegations it deems credible to the appropriate law enforcement entity.
(b) The identity of any reporting person shall remain confidential unless that person authorizes disclosure of his or her identity or until such time as the allegation of prohibited conduct is referred to law enforcement.
(c) If the commission receives a complaint of prohibited conduct by an athlete, the commission shall notify the appropriate sports governing body of the athlete to review the complaint as provided by rule.
(d) The commission shall adopt rules governing investigations of prohibited conduct and referrals to law enforcement entities.
(b) Privilege tax obligation imposed by this section is in lieu of other taxes. -- With the exception of the ad valorem property tax collected under chapter eleven-a of this code, the privilege tax on adjusted gross daily fantasy sports contest receipts imposed by this section is in lieu of all other state and local taxes and fees imposed on the operation of, or the proceeds from operation of West Virginia Daily Fantasy Sports Contests, except as otherwise provided in this section. The consumers sales and services tax imposed pursuant to §11-15-1 et seq. of this code, and any similar local tax imposed at the municipal or county level, shall not apply to the licensee’s gross receipts from any West Virginia Daily Fantasy Sports Contests or to the licensee’s purchase of daily fantasy sports contest equipment, supplies, or services directly used in operation of the daily fantasy sports contests authorized by this article.
(c) The special fund in the State Treasury known as the West Virginia Daily Fantasy Sports Contests Fund is hereby created and all moneys collected under this article by the commission shall be deposited with the State Treasurer to the West Virginia Daily Fantasy Sports Contests Fund. The fund shall be an interest-bearing account with all interest or other return earned on the money of the fund credited to and deposited in the fund. All expenses of the commission incurred in the administration and enforcement of this article shall be paid from the West Virginia Daily Fantasy Sports Contests Fund pursuant to §29-22F-8(d) of this code.
(d) The commission shall deduct an amount sufficient to reimburse its actual costs and expenses incurred in administering licensed daily fantasy sports contests from the gross deposits into the West Virginia Daily Fantasy Sports Contests Fund. The amount remaining after the deduction for administrative expenses is the net profit.
(1) Administrative allowance. -- The commission shall retain up to 15% of gross deposits for the fund operation and its administrative expenses: Provided, That in the event that the percentage allotted for operations and administration generates a surplus, the surplus shall be allowed to accumulate but may not exceed $250,000. On a monthly basis, the director shall report any surplus in excess of $250,000 to the Joint Committee on Government and Finance and remit the entire amount of those surplus funds in excess of $250,000 to the State Treasurer which shall be allocated as net profit.
(2) Distribution of net profit. -- In each fiscal year, net profit shall be deposited into the State Lottery Fund created by §29-22-18 of this code until a total of $15 million is deposited; thereafter, the remainder shall be deposited into the Public Employees Insurance Agency Financial Stability Fund to stabilize and preserve the future solvency of PEIA, and such amount may not be included in the calculation of any plan year aggregate premium cost-sharing percentages between employers and employees.
(b) Any resident, or non-resident if allowed to participate in daily fantasy sports, may voluntarily prohibit himself or herself from establishing a daily fantasy sports account with a licensee under this article. The commission shall incorporate the voluntary self-exclusion program for daily fantasy sports into any existing self-exclusion program that it operates on the effective date of this article.
(c) If a self-excluded person participates in a daily fantasy sports contest, the daily fantasy sports contest operator shall report to the commission, at a minimum, the name of the self-excluded person, the date of participation, the amount or value of any monies, prizes or awards forfeited, if any, and any other action taken.
(d) A daily fantasy sports contest operator may not pay any prize or award to a person who is on the commission’s self-exclusion list. Any prize or award won by a person on the self-exclusion list shall be forfeited and shall be donated by the daily fantasy sports contest operator to the problem gaming charities or programs as identified and directed by the commission on a quarterly basis by the twenty-fifth day of the following month.
(e) A daily fantasy sports contest operator shall develop and maintain a program to mitigate compulsive play and curtail compulsive play, which may be in conjunction with the commission.
NOTE: The purpose of this bill is to authorize, regulate, and tax the operation of daily fantasy sports contests in which participants utilize skill to compete against the entity operating the fantasy sports contest.
Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.
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