Tennessee Becomes Third State to Regulate DFS

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Less than a month after the Tennessee Attorney General declared that daily fantasy sports was illegal, a new bill has been passed and signed by the governor. It was passed overwhelming by the Tennessee Senate and House over the last couple weeks.

The Basics of the New Regulation

With the signing of the legislation, the new law will updates the state’s definition of what is considered gambling in the state. Tennessee becomes the third state to regulate DFS, coming on the heels of legislation passedin Virginia and Indiana earlier this March.

To operate in the state and continue offering daily fantasy sports contests to Tennessee residents, DFS operators must become licensed. DraftKings and FanDuel did not leave after the Attorney General decision in early April, but it is expected that they and others will be eager to participate in the market. The new law mandates that operators must decide before July 1st whether to apply for a license or stop servicing Tennessee residents.

What’s In the New Tennessee Daily Fantasy Sports Bill?

Licensed operators will be required to pay a 6% tax on revenue generated by Tennessee residents. This contrasts much heavier license fees in Indiana and Virginia, which each require a $50,000 license fee (a significant hurdle for smaller to mid-size operators) . Additional fees may be assessed by Tennessee’s Secretary of State, but it is not known at this time what they may be.

In addition to establishing licenses and license fees, the new bill provides a variety of consumer protections including adding a minimum age of 18, banning contests on college and amateur games and events and segregating player balances from operation funds. Player deposits will also be limited to $2,500 per month per operator, although players may be able to raise deposit limits.

The legislation also addresses employee play, which was at the center of the data leak scandal, which has been a catalyst for the scrutiny the industry has faced over the last 9 months. Employees will not be able to play any DFS contest with a prize over $5 from any operator. The emoployee may play on private contests.

To read the full nuts and bolts of the Tennessee daily fantasy sports legislation can be found here.