Image credit: Dannel Malloy

Last week, Connecticut became the latest state to formally legalize and regulate daily fantasy sports. Governor Dannel Malloy signed off on a budget last Tuesday that includes provisions to legalize daily fantasy sports and implement regulations over the industry. However, a few details concerning tribal gaming interests still need to be ironed out before the new regulations can take effect.

The sprawling 881-page, two-year budget seeks to avoid financial disaster for Connecticut with measures designed to keep Hartford out of bankruptcy, deal with a $3.5 billion deficit and more. In addition to boosting taxes by nearly $500 million per year, the budget also includes a section that will legalize and regulate daily fantasy sports in Connecticut.

Section 649 in the budget deals with daily fantasy sports and looks similar to legalization measures that have passed in other states. It calls on the Commissioner of Consumer Protection to adopt regulations safeguarding consumers and establishes a licensing process for DFS operators.

These regulations are to be formed no later than July 1st, 2018 and fantasy sites operators will need to submit licensing applications within sixty days after that date. As far as regulations go, the budget leaves some discretion to the Commissioner of Consumer Protection but lays out some general goals that should be accomplished by the regulations:

  • Enforce a minimum age of 18 to play
  • Establish measures to protect players’ funds
  • Establish truthful advertising requirements
  • Establish procedures to ensure the integrity of DFS contests
  • Require operators to provide Information regarding responsible gaming and where to get help for compulsive behavior

DFS operators will also be subject to a $15,000 initial registration fee with an annual renewal fee of $15,000. These fees are to be reduced for operators such that those fees do not exceed 10% of the operators’ gross receipts. DFS operators will be taxed 10.5% on gross receipts.

Minor Amendments to Tribal Compacts Still Needed

The section in the budget pertaining to fantasy sports makes it clear that minor amendments must be made in the compacts Connecticut has with the two gaming tribes in the state before any of the new DFS legislation takes effect. The state and both tribes must agree to these amendments and then the secretary of the U.S. Department of the Interior would have to approve of the amendments.

The Mashantucket Pequot and Mohegan tribes, operators of the Foxwoods and Mohegan Sun casinos, have longstanding agreements with the state in which the tribes are given exclusive rights to operate slot machines and other forms of gaming. In return, the tribes contribute 25% of their gross slots revenue to the state each month.

Nobody is proposing to change that part of the deal. What does need to change is a provision in the agreement that ends all tribal contributions to Connecticut in the event the state authorizes anyone other than the tribes to operate “video facsimile games (slots) or other commercial games…”

Bills seeking the legalize daily fantasy sports ran into the same issue last year. Back then, state Attorney General George Jepsen warned lawmakers that passing legislation friendly to DFS would threaten those tribal contributions to the state. With minimum contributions of $100 million per year from the Mashantucket Pequot tribe alone, lawmakers are understandably approaching this issue with a sense of caution.

So, in order to ensure the more important gaming compacts remain valid, the state must deal with the tribes and all parties will need to come to an agreement that legalizing DFS will not terminate the compact. The bill specifically mentions that tribal contributions to the state must stay in effect and that tribes will continue to have exclusive rights to operate slots and “other commercial games.”

If the tribes and states reach an agreement, the amendments to their compacts will go to the secretary of the Department of the Interior for final approval. Only after that will the proposed regulations take effect.

None of this seems particularly difficult or controversial, so this should be a fairly straightforward process barring any unexpected objections from the tribes or Department of the Interior.

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