Blanco Fantasy Bill Declares Paid Contests Not Gambling

The text as introduced · 3,634 words

89R4049 BEE-F

By: Blanco
S.B. No. 2752

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of fantasy contests; requiring an

occupational license; imposing an administrative penalty;

authorizing fees; imposing a tax.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle B, Title 13, Occupations Code, is

amended by adding Chapter 2053 to read as follows:

CHAPTER 2053. FANTASY CONTESTS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2053.001. DEFINITIONS. In this chapter:

(1) "Adjusted gross fantasy contest receipts" means an

amount equal to the sum of all entry fees a fantasy contest operator

collects from participants less the sum of all prizes paid to

participants multiplied by the location percentage.

(2) "Athlete" means a professional or amateur

competitor in an actual sporting event that is:

(A) regulated by a governing body; and

(B) held between competitors who play

individually or as teams.

(3) "Commission" means the Texas Lottery Commission.

(4) "Entry fee" means the amount of cash or cash

equivalent a participant pays in advance to participate in a

fantasy contest offered by a fantasy contest operator.

(5) "Fantasy contest" means an online fantasy or

simulated game or a contest of skill:

(A) that charges an entry fee; and

(B) in which:

(i) the value of all prizes offered to a

winning participant are established and disclosed to the

participant in advance of the contest;

(ii) all winning outcomes reflect the

participant's relative knowledge and skill;

(iii) the participant assembles, owns, or

manages a fictional roster of actual athletes;

(iv) the participant competes for prizes a

fantasy contest operator awards based on terms the fantasy contest

operator publishes and discloses to the participant in advance of

the contest;

(v) participants compete against each other

or a single participant competes against a target score the fantasy

contest operator establishes;

(vi) a winning outcome is determined solely

by clearly established scoring criteria based on statistical

results of athlete performance, including a fantasy score; and

(vii) a winning outcome is not based on the

score, the point spread, or any performance of one actual team or a

combination of teams or solely on one performance of an individual

athlete in one actual sporting event.

(6) "Fantasy contest operator" means a person who

offers fantasy contests to the public. The term does not include an

Internet service or mobile data service provider who digitally

transfers general information that may include a fantasy contest.

(7) "Location percentage" means the percentage

rounded to the nearest 0.1 percent of the total amount of entry fees

a fantasy contest operator collects from participants located in

this state, divided by the total amount of entry fees the operator

collects from all participants in the fantasy contest.

(8) "Participant" means an individual who

participates in a fantasy contest offered by a fantasy contest

operator. The term does not include an operator who only:

(A) sets house rules for a fantasy contest;

(B) assigns a salary or target score to any

eligible athlete;

(C) accepts an entry fee from an individual who

participates in a fantasy contest; or

(D) awards or disburses prizes in accordance with

this chapter.

(9) "Prohibited participant" means:

(A) an individual who has self-excluded from

participation in fantasy contests under this chapter; or

(B) an athlete, coach, referee, trainer, or staff

member of a sports team, if a fantasy contest entry includes an

athlete selection from a sporting event overseen by the same sports

governing body that oversees the athlete, coach, referee, trainer,

or member.

(10) "Sporting event" means an actual athletic event,

an organized video game competition, or other event the commission

approves that is regulated by a sports governing body and is held as

a competition between athletes who play individually or as teams.

(11) "Sports governing body" means the organization

that prescribes rules and enforces codes of conduct for a sporting

event and the athletes competing in the sporting event.

Sec. 2053.002. FANTASY CONTEST NOT GAMBLING. A fantasy

contest conducted under this chapter does not constitute gambling

for any purpose, including under Chapter 47, Penal Code.

Sec. 2053.003. CONSTRUCTION OF CHAPTER. (a) This chapter

shall be construed liberally to promote the general welfare of the

public and the integrity of the fantasy contest industry.

(b) The commission may not:

(1) adopt rules limiting or regulating:

(A) the house rules or administration of a single

fantasy contest;

(B) the statistical composition of a fantasy

contest; or

(C) the digital platform of a fantasy contest

operator; or

(2) in any way limit or restrict the types of fantasy

contests allowed under this chapter by labelling the contest as

gambling.

(c) Notwithstanding any other law, the operation of a

fantasy contest is lawful only when conducted in accordance with

this chapter and rules adopted under this chapter.

SUBCHAPTER B. COMMISSION POWERS AND DUTIES

Sec. 2053.051. REGULATION OF FANTASY CONTEST OPERATORS.

The commission shall regulate the conduct of fantasy contest

operators under this chapter.

Sec. 2053.052. GENERAL POWERS. The commission may exercise

the powers necessary to enforce this chapter and rules adopted

under this chapter.

Sec. 2053.053. RULES. (a) The commission shall adopt the

rules the commission considers necessary for the implementation,

administration, and enforcement of this chapter.

(b) Rules the commission proposed under this chapter may be

adopted as emergency rules under Section 2001.034, Government Code.

Sec. 2053.054. REVENUE COLLECTION. The commission shall

assess and collect each fee or tax imposed under this chapter.

Sec. 2053.055. ENFORCEMENT. (a) The commission shall

require fantasy contest operators to implement procedures to

prevent fraud, abuse, and money laundering in the operation of

fantasy contests.

(b) The commission shall verify each fantasy contest

operator implements:

(1) technology and procedures to prevent

participation in a fantasy contest by an individual who is under 18

years of age;

(2) identity verification procedures, including as

necessary the use of a reputable independent third-party in the

business of verifying individuals' personally identifiable

information to detect potential prohibited participants;

(3) mechanisms on the operator's platform designed to

detect and prevent unauthorized accounts, fraud, money laundering,

and collusion; and

(4) geolocation technology to verify a participant

does not enter a fantasy contest from a restricted jurisdiction, as

determined by commission rule.

(c) The commission may cooperate with an investigation

conducted by a law enforcement agency, including providing and

facilitating the provision of account-level entry and

participation information.

Sec. 2053.056. COMPULSIVE AND PROBLEM GAMING STANDARDS.

The commission by rule shall establish compulsive and problem

gaming standards consistent with this chapter for fantasy contest

operators.

SUBCHAPTER C. FANTASY CONTEST OPERATOR LICENSE

Sec. 2053.101. FANTASY CONTEST OPERATOR LICENSE REQUIRED.

A person may not offer or operate a fantasy contest in this state

unless the person holds a fantasy contest operator license issued

by the commission.

Sec. 2053.102. LICENSE APPLICATION. (a) An applicant for a

fantasy contest operator license shall submit an application in

accordance with commission rules.

(b) An application for a fantasy contest operator license

must include:

(1) the applicant's:

(A) name;

(B) principal place of business;

(C) contact information; and

(D) social security number or any applicable

federal tax identification number;

(2) the identity of each individual who has an

ownership interest of at least 10 percent in the applicant or in

shares of the applicant;

(3) criminal history record information of the

applicant;

(4) any ownership interest in a fantasy contest

operator or similar entity in any jurisdiction that is held by a

director, officer, key employee, or individual owner of at least 10

percent of the applicant;

(5) the identity of any business, including a business

in the jurisdiction where the business is incorporated or

registered, in which the applicant or a director, officer, key

employee, or individual owner of at least 10 percent of the

applicant holds an equity interest of at least five percent;

(6) a statement on whether the applicant or a

director, officer, key employee, or individual owner of at least 10

percent 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;

(7) a statement on whether the applicant or a

director, officer, key employee, or individual owner of at least 10

percent of the applicant has filed or been served with a complaint

or other notice filed by a governmental entity regarding

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 period applicable to the complaint or notice; and

(8) information the commission determines is

sufficient to demonstrate the applicant satisfies the requirements

of this chapter and rules adopted under this chapter.

(c) On commission request, an applicant for a fantasy

contest operator license that is a business entity shall include in

the application the criminal history record information of an

individual who is:

(1) a director, officer, or key employee of the

applicant; or

(2) any individual with an ownership interest of 10

percent or more in the applicant.

(d) The commission by rule may establish additional

qualifications and requirements for a fantasy contest operator

license applicant or license holder as necessary to preserve the

integrity and security of fantasy contests in this state and to

promote and maintain a competitive fantasy contest market.

Sec. 2053.103. CRIMINAL HISTORY RECORD INFORMATION;

FINGERPRINTS. (a) An applicant for a fantasy contest operator

license shall submit fingerprints in accordance with this section

to the commission or to the Department of Public Safety, as

determined by commission rule, for the purpose of obtaining

criminal history record information from the Department of Public

Safety and the Federal Bureau of Investigation.

(b) Fingerprints must be furnished under Subsection (a) by

the applicant's:

(1) owners;

(2) officers;

(3) directors for a corporation applicant;

(4) managers and members for a limited liability

company applicant; and

(5) partners for a partnership applicant.

(c) Each set of fingerprints submitted under Subsection (a)

must be accompanied by an authorization signed by the fingerprinted

individual for the release of information by the Department of

Public Safety and the Federal Bureau of Investigation.

(d) Notwithstanding Subsection (a), an applicant or an

individual described by Subsection (b) who has submitted to a check

of national criminal history record information in any state in the

preceding year before submitting an application under this chapter

is not required to submit to another check of criminal history

record information if the applicant or individual:

(1) provides the results of the previous check of

criminal history record information to the commission; and

(2) affirms no material change has occurred in the

individual's criminal history record information since the check

was conducted.

Sec. 2053.104. INITIAL LICENSE FEE. (a) Except as provided

by Subsection (b), a fantasy contest operator operating in this

state at any time during the preceding year shall remit to the

commission an initial license fee of:

(1) an amount equal to eight percent of the operator's

adjusted gross fantasy contest receipts from the preceding calendar

year; or

(2) $500,000.

(b) A fantasy contest operator that has not operated in this

state at any time during the preceding year shall remit to the

commission an initial license fee of $5,000. A fantasy contest

operator that pays the initial license fee under this subsection

shall remit to the commission a supplemental license fee of the

lesser of:

(1) an amount equal to 10 percent of the operator's

adjusted gross fantasy contest receipts for the first year of

licensure, beginning on the date of licensure, less the amount of

the initial license fee; or

(2) $5,000.

Sec. 2053.105. ISSUANCE OR DENIAL OF LICENSE. (a) On

receipt of a completed application for a fantasy contest operator

license and the required fee, the commission shall conduct the

necessary background investigation to determine whether the

applicant satisfies the qualifications for the license.

(b) On completion of the necessary background

investigation, the commission shall issue a license or deny the

application. The commission may not issue a license to an applicant

convicted of a disqualifying offense.

(c) If the application is denied, the commission shall

forward a statement of the grounds for denial to the applicant and

all other documents on which the commission relied, to the extent

allowed by law.

Sec. 2053.106. LICENSE TERM. (a) A license issued under

this chapter expires on the fourth anniversary of the date of

issuance.

(b) The commission may not require the holder of a fantasy

contest operator license to surrender or terminate the license

before the expiration date of the license solely because of rules

amended under this chapter.

Sec. 2053.107. LICENSE RENEWAL. (a) The commission shall

establish a process for renewing a fantasy contest operator license

issued under this chapter, including the assessment of a renewal

fee in an amount equal to one percent of the license holder's

adjusted gross fantasy contest receipts for the preceding four

years.

(b) The commission may require an applicant for renewal of a

fantasy contest operator license to submit to additional criminal

history record information checks as described by Section 2053.103.

(c) The commission may grant an extension of time for the

renewal of a fantasy contest operator license on receipt of a

written request submitted by the license holder.

(d) A fantasy contest operator license holder that allows

the license to lapse without requesting an extension of time to file

for renewal of the license must submit an initial license

application.

Sec. 2053.108. APPLICANT OPERATION DURING LICENSE

APPLICATION PERIOD. (a) A fantasy contest operator that submits an

application for a license or license renewal under this chapter may

operate during the application period unless the commission:

(1) has reasonable cause to believe the fantasy

contest operator is or may be in violation of this chapter or rules

adopted under this chapter; and

(2) requires the fantasy contest operator to suspend

operation of any fantasy contest until the license or license

renewal is issued.

(b) Notwithstanding Subsection (a), a fantasy contest

operator that offered fantasy contests to individuals located in

this state before September 1, 2025, may continue to offer contests

to those individuals until the commission approves or denies the

fantasy contest operator's application under this chapter if the

fantasy contest operator files the application with the commission

not later than the 90th day after the date the commission adopts

rules to implement this chapter. This subsection expires September

1, 2029.

Sec. 2053.109. INDEPENDENT AUDIT. (a) Subject to

Subsection (b), an applicant for an initial or renewal fantasy

contest operator license 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,

certified public accountant, or another professional service

provider the commission recognizes to verify in a written report

compliance with this chapter and rules adopted under this chapter;

and

(3) submit to the commission a copy of the audit report

and a copy of the compliance report provided by the entity with

which the applicant contracted under Subdivision (2).

(b) An applicant for an initial fantasy contest operator

license under this chapter is not required to submit an audit report

and a compliance report until after the second anniversary of the

initial license issuance.

SUBCHAPTER D. OPERATION OF FANTASY CONTEST

Sec. 2053.151. MINIMUM AGE OF PARTICIPANT. An individual

may not participate in a fantasy contest under this chapter if the

individual is younger than 18 years of age.

Sec. 2053.152. LOCATION OF PARTICIPANT. A fantasy contest

operator license holder may only accept an entry from a participant

physically located in this state. A fantasy contest operator must

use a geolocation system to ensure each participant is physically

present in this state when submitting a fantasy contest entry

unless otherwise authorized by the commission.

Sec. 2053.153. FANTASY CONTEST OPERATOR TAX. (a) For the

privilege of holding a license to operate fantasy contests under

this chapter, the commission shall impose and collect a tax at a

rate equal to 10 percent of the fantasy contest operator's adjusted

gross fantasy contest receipts.

(b) The accrual method of accounting shall be used to

calculate the amount of tax due. The fantasy contest operator shall

submit to the commission on or before the last day of each calendar

month:

(1) a return indicating:

(A) the amount of tax due under this section for

the preceding calendar month; and

(B) any other information the commission by rule

requires; and

(2) payment of the tax due under this section.

Sec. 2053.154. COMPULSIVE GAMING; VOLUNTARY

SELF-EXCLUSION. (a) Each fantasy contest operator licensed under

this chapter shall include a statement regarding assistance with

gambling problems on:

(1) the license holder's portal, Internet website, or

computer or mobile application; and

(2) all of the license holder's marketing materials

and advertisements.

(b) The commission shall maintain a voluntary

self-exclusion list of individuals who request to be prohibited

from establishing a fantasy contest account with a fantasy contest

operator under this chapter.

(c) A fantasy contest operator may not pay a prize to an

individual included on the commission's self-exclusion list. A

prize won by an individual on the self-exclusion list is forfeited.

The fantasy contest operator shall donate any forfeited prize to a

problem gaming program, as identified and directed by the

commission, not later than the 25th day of the month following the

end of each quarter.

(d) If a self-excluded individual participates in a fantasy

contest, the fantasy contest operator shall report to the

commission:

(1) the name of the self-excluded individual;

(2) the date of the self-excluded individual's

participation in the fantasy contest;

(3) the amount or value of any prizes forfeited by the

self-excluded individual; and

(4) any other action taken by the fantasy contest

operator.

(e) A fantasy contest operator shall develop and maintain a

program to mitigate and curtail compulsive play, which may be

implemented in conjunction with the commission.

SUBCHAPTER E. REPORTING, INVESTIGATION, AND ENFORCEMENT

Sec. 2053.201. REQUIRED REPORTING BY LICENSE HOLDER. The

holder of a fantasy contest operator license shall promptly notify

the commission of any information relating to:

(1) a confirmed breach of the relevant sports

governing body's internal regulations and codes of conduct

regarding participation in fantasy contests that is provided to the

fantasy contest operator;

(2) conduct corrupting any outcome related to a

sporting event for financial gain purposes, including match fixing;

and

(3) confirmed illegal activities, including use of

money derived from illegal activity, entries to conceal or launder

money derived from illegal activity, multi-accounting, and use of

false identification.

Sec. 2053.202. COMMISSION INVESTIGATION AND REPORTING OF

PROHIBITED CONDUCT. (a) The commission shall investigate all

reasonable allegations of prohibited conduct and refer any credible

allegations to an appropriate law enforcement agency.

(b) The identity of any person reporting prohibited conduct

is confidential unless:

(1) the person authorizes disclosure of the person's

identity; or

(2) the allegation of prohibited conduct is referred

to a law enforcement agency.

(c) If the commission receives a complaint of prohibited

conduct by an athlete, the commission in accordance with commission

rules shall notify the appropriate sports governing body of the

athlete to review the complaint.

(d) The commission shall adopt rules governing

investigations of prohibited conduct and referrals to law

enforcement agencies.

Sec. 2053.203. LICENSE HOLDER COOPERATION WITH

INVESTIGATION. A fantasy contest operator license holder may

cooperate with investigations conducted by law enforcement

agencies, including providing and facilitating the provision of

account-level entry and participation information.

Sec. 2053.204. ADMINISTRATIVE PENALTY. (a) The commission

may impose an administrative penalty on a person licensed under

this chapter who violates this chapter or a rule adopted under this

chapter.

(b) The amount of the penalty may not exceed $5,000, and

each day a violation continues or occurs is a separate violation for

the purpose of imposing a penalty. The amount shall be based on:

(1) the seriousness of the violation, including the

nature, circumstances, extent, and gravity of the violation;

(2) the economic harm caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter a future violation;

(5) efforts to correct the violation; and

(6) any other matter that justice may require.

(c) The enforcement of the penalty may be stayed during the

time the order is under judicial review if the person pays the

penalty to the clerk of the court or files a supersedeas bond with

the court in the amount of the penalty. A person who cannot afford

to pay the penalty or file the bond may stay the enforcement by

filing an affidavit in the manner required by the Texas Rules of

Civil Procedure for a party who cannot afford to file security for

costs, subject to the right of the commission to contest the

affidavit as provided by those rules.

(d) The attorney general may sue to collect the penalty.

(e) A proceeding to impose the penalty is considered to be a

contested case under Chapter 2001, Government Code.

SECTION 2. Section 411.108(a-1), Government Code, is

amended to read as follows:

(a-1) The Texas Lottery Commission is entitled to obtain

criminal history record information as provided by Subsection (a-2)

that relates to a person :

(1) licensed under Chapter 2001, Occupations Code ;

(2) [ , or ] described by Section 2001.3025, Occupations

Code ; or

(3) holding or applying for a license under Chapter

2053, Occupations Code .

SECTION 3. Not later than February 1, 2026, the Texas

Lottery Commission shall adopt the rules necessary to implement

Chapter 2053, Occupations Code, as added by this Act.

SECTION 4. Notwithstanding Section 2053.153, Occupations

Code, as added by this Act, a fantasy contest operator license

holder is not required to pay the tax established by that section

before July 1, 2026.

SECTION 5. This Act takes effect September 1, 2025.