June 26, 2017

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Vermont Becomes Second State to Legalize Daily Fantasy Sports in 2017

On Thursday, June 8th, Vermont Governor Phil Scott signed into a law a bill that legalizes and regulates the operation of paid-entry fantasy sports contests within the state. Vermont is at least the eleventh state to pass a bill legalizing some form of fantasy sports and the second state to do so in 2017.

The Vermont bill—S 136—defines a “fantasy sports contest” as follows:

“Fantasy sports contest” means a virtual or simulated sporting event governed by a uniform set of rules adopted by a fantasy sports operator in which: (A) a fantasy sports player may earn one or more cash prizes or awards, the value of which a fantasy sports operator discloses in advance of the contest; (B) a fantasy sports player uses his or her knowledge and skill of sports data, performance, and statistics to create and manage a fantasy sports team; (C) a fantasy sports team earns fantasy points based on the sports performance statistics accrued by individual athletes or teams, or both, in real world sporting events; (D) the outcome is determined by the number of fantasy points earned; and (E) the outcome is not determined by the score, the point spread, the performance of one or more teams, or the performance of an individual athlete.

The bill makes “fantasy sports contests” exempt from the state’s gambling laws. Among numerous other consumer protection measures, the bill requires that all participants be at least 18 years old and restricts the use of computer scripts that provide players with an unfair advantage. For contests with a cash prize of $5.00 or more, both employees of contest operators and professional athletes or officials involved in a real world sporting event that is the same sport as the fantasy sports contest are prohibited from participating. Contests based on college, high school, or youth athletic events are also prohibited. In order to offer paid contests in Vermont, operators must register with the Secretary of State and pay an annual registration fee of $5,000.

In April, Arkansas similarly enacted legislation legalizing and regulating “paid fantasy sports games.” The enacted Arkansas bill—HB 2250—defines “paid fantasy sports games” as follows:

(5) “Paid fantasy sports game” means any fantasy sports game or contest that meets the following conditions: (A) The values of all prizes and awards offered to winning game participants in public contests are established and made known to the game participants in advance of the game or contest; (B) All winning outcomes reflect the relative knowledge and skill of the game participants and are determined predominantly by accumulated statistical results of the performance of individual athletes in actual sporting events; (C) A winning outcome is not based on the score, point spread, or performance or performances of any single team or combination of teams or solely on any single performance of an individual athlete or player in any single event; (D) The statistical results of the performance of individuals under subdivision (5)(B) of this section are not based on college or high school sports or on horse racing or greyhound racing; (E) A paid fantasy sports game participant is not permitted to select an athlete through an automatic draft that does not involve any input or control by the paid fantasy sports game participant or to choose preselected teams of athletes; (F) A winning outcome is determined by accumulated statistical results of fully completed contests or events and not merely a portion of a contest or event, except that a paid fantasy sports game participant may be credited for statistical results accumulated in a suspended or shortened contest or event that has been suspended or shortened on account of weather or other natural or unforeseen event; and (G)(i) Each paid fantasy sports participant is required to pay an entry fee to participate, and (ii) Payment under subdivision (5)(G)(i) of this section shall be with cash or a cash equivalent and is not gambling for the purposes of [the state’s gambling laws].

All game operators in Arkansas are required to pay an 8% tax on the game operator’s gross paid fantasy sports game revenues from the previous state fiscal year.

Arkansas and Vermont join Colorado, Indiana, Massachusetts, Mississippi, Missouri, New York, Tennessee, and Virginia, which each passed DFS-specific legislation in 2016, as well as Kansas, which explicitly exempted “fantasy sports leagues” from the state’s definition of “bet” in 2015. The state of Maryland is also often viewed as having legalized DFS, with the state’s Comptroller having officially implemented regulations on DFS earlier this year. Numerous other states may yet pass DFS-specific legislation in 2017.

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Associate

Mark Patrick is an associate in the Intellectual Property Group Practice in the firm's Washington D.C. office.

  • J.D., American University, Washington College of Law, 2015

  • B.S., University of Maryland,

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