2016 -- H 7917

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LC005376

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- FANTASY CONTEST

REGISTRATION

     Introduced By: Representatives Ruggiero, Craven, Kennedy, Marshall, and Blazejewski

     Date Introduced: March 10, 2016

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 5 of the General Laws entitled "BUSINESSES AND PROFESSIONS"

is hereby amended by adding thereto the following chapter:

CHAPTER 89

FANTASY CONTEST REGISTRATION

     5-89-1. Definitions. -- As used in this chapter, except as otherwise required by the

context:

     (1) "Confidential information" means information related to the play of a fantasy contest

by fantasy contest players obtained as a result of or by virtue of a person's employment.

     (2) "Department" means the department of business regulation.

     (3) "Entry fee" means cash or cash equivalent that is required to be paid by a fantasy

contest participant to a fantasy contest operator in order to participate in a fantasy contest.

     (4) "Fantasy contest" means any online fantasy or simulated game or contest with an

entry fee in which:

     (i) The value of all prizes and awards offered to winning participants is established and

made known to the participants in advance of the contest;

     (ii) All winning outcomes reflect the relative knowledge and skill of the participants and

shall be determined by accumulated statistical results of the performance of individuals, including

athletes in the case of sports events; and

     (iii) No winning outcome is 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.

     (6) "Fantasy contest operator" or "operator" means a person or entity that offers fantasy

contests for a cash prize to members of the public.

     (7) "Fantasy contest player" or "player" means a person who participates in a fantasy

contest offered by a fantasy contest operator.

     (8) "Principal stockholder" means any person who individually or in concert with their

spouse and/or immediate family members, legally or beneficially owns or controls, directly or

indirectly, fifteen percent (15%) or more of the equity ownership of a fantasy contest operator or

who, in concert with their spouse and/or immediate family members, has the power to vote or

cause the vote of fifteen percent (15%) or more of any such fantasy contest operator.

     5-89-2. Mandatory registration of fantasy contest operators and consumer

protection. -- (a) No fantasy contest operator shall offer any fantasy contest in the state of Rhode

Island without first being registered with the department of business regulation. Registration shall

be on forms prescribed by the department. Any registration issued by the department shall be

valid for one year from the date of issuance.

     (b) The application for registration submitted by a fantasy contest operator shall contain

the following information:

     (1) The name and principal address of the applicable; if a corporation, the state of its

incorporation, the full name and address of each officer and director thereof, and, if a foreign

corporation, whether it is qualified to do business in the state of Rhode Island; if a partnership or

joint venture, the name and address of each officer thereof;

     (2) The address of any offices of the applicant in the state of Rhode Island and its

designated agent for service of process, within the state. If the operator does not maintain an

office, the name and address of the person having custody of its financial records;

     (3) The place where and the date when the applicant was legally established and the form

of its organization;

     (4) The names and addresses of the officers, directors, trustees, and the principal salaried

executive staff officer;

     (5) The name and address of each principal stockholder or member of such corporation;

and

     (6) Such other information that the department deems necessary to ensure compliance

with the provisions of this chapter.

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     (7) As a part of its investigation as to whether to issue a registration hereunder, the

department shall require criminal background checks of individuals as it deems appropriate and

said individuals shall apply to the bureau of criminal investigation of the Rhode Island state

police or the Rhode Island department of the attorney general for a national criminal records

check with fingerprinting. The applicant whose criminal records check is being conducted shall

be responsible for the payment of the costs of said criminal records check. The Rhode Island state

police or the Rhode Island department of the attorney general, as applicable, shall send the results

of such criminal records check to the department. Prior to issuing any registrations, the

department shall adopt rules and regulations establishing criteria to be used in determining

whether based upon a criminal records check an application will be approved.

     (c) Every registration filed under this chapter shall be accompanied by a nonrefundable,

initial application fee set by the department.

     (d) As a condition of registration, a fantasy contest operator shall submit evidence

satisfactory to the department that the operator has established and will implement rules and

regulations for fantasy contests that:

     (1) Prevent their employees and relatives living in the same household as the operator

from competing in any public fantasy contest offered by such operator in which the operator

offers a cash prize;

     (2) Prevent the sharing of confidential information that could affect fantasy contest play

with third parties until the information is made publicly available;

     (3) Verify that any fantasy contest player is eighteen (18) years of age or older;

     (4) Ensure that players who are the subject of a fantasy contest are restricted from

entering a fantasy contest that is determined, in whole or part, on the accumulated statistical

results of a team of individuals in which such players are participants;

     (5) Allow individuals to restrict themselves from entering a fantasy contest upon request

and take reasonable steps to prevent those individuals from entering the operator's fantasy

contests;

     (6) Disclose the number of entries a single fantasy contest player may submit to each

fantasy contest and take reasonable steps to prevent such players from submitting more than the

allowable number; and

     (7) Segregate player funds from operational funds in separate accounts and maintain a

reserve in the form of cash, cash equivalents, irrevocable letter of credit, bond, or a combination

thereof in an amount sufficient to pay all prizes and awards offered to winning participants.

     (e) If the registration forms are filed online using a website approved by the department,

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the operator shall follow the procedures on that website for executing the forms.

     (f) Any operator that allows its registration to lapse, without requesting an extension sixty

(60) days prior to its expiration, shall be required to resubmit an initial registration for a fee of ten

thousand dollars ($10,000). An extension may be granted by the department upon receipt of a

written request.

     5-89-3. Registration issuance. -- (a) The department shall consider all applications for

registration and shall issue a valid registration to an applicant that meets the criteria established

by this chapter and its rules and regulations.

     (b) The department shall deny registration to any applicant unless it finds that the

applicant meets the criteria established by the department for the granting of registration.

     (c) The department may deny registration to an applicant if it finds that the applicant, or

any officer, partner, principal stockholder, or director of the applicant:

     (1) Has knowingly made a false statement of material fact or has deliberately failed to

disclose any information requested;

     (2) Has at any time knowingly failed to comply with the provisions of this chapter or of

any requirements of the department;

     (3) Has had a registration or permit to hold or conduct fantasy contests denied for just

cause, suspended, or revoked in any other state or country;

     (4) Has legally defaulted in the payment of any obligation or debt due to the state of

Rhode Island; or

     (5) Is not qualified to do business in the state or is not subject to the jurisdiction of the

courts of the state of Rhode Island.

     (d) Any operator applying for registration or renewal of a registration may operate during

the application period unless the department has reasonable cause to believe that such operator is

or may be in violation of the provisions of this chapter and the department requires such operator

to suspend the operation of any fantasy contest until registration or renewal of registration is

issued.

     (e) The department shall issue such registration within sixty (60) days of receipt of the

application for registration or renewal. If the registration is not issued or renewed, the department

shall provide the operator with the justification for not issuing or renewing such registration with

specificity.

     5-89-4. Fees and charges. -- (a) The initial fee for an application for registration in

accordance with this act shall be fifty thousand dollars ($50,000). Thereafter, the annual fee for

an application for registration shall be twenty thousand dollars ($20,000) a year.

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     (b) All fees, charges, and monetary penalties collected by the department as provided in

this chapter shall be paid into the general fund.

     (c) Quarterly, the state of Rhode Island shall receive twenty percent (20%) of all funds

generated from Rhode Island residents from fantasy contest operations.

     5-89-5. Independent audit. -- The state of Rhode Island has the right to hire, at

operator's expense, an independent auditor. A registered operator shall submit an annual audited

report of revenues to the department.

     5-89-6. Powers and duties of the department of business regulations. -- (a) The

department shall have all powers and duties necessary to carry out the provisions of this chapter.

The department may establish procedures and regulations deemed necessary to carry out the

provisions of this chapter.

     (b) Whenever it appears to the department that any person has violated any provision of

this chapter, it may apply to the appropriate court for an injunction against such person. The order

granting or refusing such injunction shall be subject to appeal as in other cases in equity.

     (c) Whenever the department has reasonable cause to believe that a violation of this

chapter may have occurred, the department, upon its own motion or upon complaint of any

person, may investigate any fantasy contest operator to determine whether such operator has

violated the provisions of this chapter. In the conduct of such investigation, the department may

require or permit any person to file a statement in writing, under oath or otherwise as the

department determines, as to all facts and circumstances concerning the matter to be investigated.

     5-89-7. Violations. -- Any person, firm, corporation, association, agent, or employee who

knowingly violates any procedure implemented by any other provision of this chapter shall be

liable for a civil penalty of not more than one thousand dollars ($1,000) for each such violation.

Such amount shall be recovered in a civil action brought by the department and be paid into the

general fund.

     5-89-8. Hearing and appeal. -- Any person aggrieved by a denial of the department to

issue a registration, the suspension or revocation of a registration, the imposition of a fine, or any

other action of the department may seek judicial review of such action in the superior court

pursuant to the provisions of chapter 35 of title 42 ("administrative procedures act").

     5-89-9. Public inspection of registration information. -- The registration of fantasy

contest operators is required to be filed and shall be considered a public record pursuant to

chapter 2 of title 38 and shall be open to the public for inspection at such time and under such

conditions as the department may prescribe.

     5-89-10. Registration not an endorsement. -- No registered operator shall use or exploit

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the fact of its registration under this chapter so as to mislead the public into believing that state

registration in any manner constitutes an endorsement or approval by the state of Rhode Island of

its fantasy contest operation.

     5-89-11. Acquisition of interest in fantasy contest operator. -- (a) If any person

acquires actual control of a registered operator, such person shall register with the department in

accordance with Rhode Island law.

     (b) Where any such acquisition of control is without prior approval of the department, the

department may suspend any registration it has issued to such operator, order compliance with

this section, or take such other action as may be appropriate within the authority of the

department.

     SECTION 2. This act shall take effect upon passage.

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LC005376

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- FANTASY CONTEST

REGISTRATION

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     This act would establish a process by which the operators of fantasy contest businesses

are to be registered and regulated.

     This act would take effect upon passage.

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LC005376

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