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.