At one end of the legal spectrum is Colorado, which last year enacted the Fantasy Sports Act. Under Colorado law, the Director of the Division of Professions and Occupations is tasked with creating rules, regulations, and licensing for DFS operators within the state of Colorado. More importantly, Colorado’s Fantasy Sports act prescribes certain actions that are centered on consumer protection. For example, a DFS entity in Colorado is required to enact reasonable procedures in order to prevent employees from sharing confidential information from third parties or family members. In addition, DFS entities must account for funds in a distinct manner, by keeping operating funds separate from gaming funds. Finally, DFS entities must distinguish “highly experienced players” and make them conspicuously identified to the remaining players. As demonstrated above, Colorado has taken significant steps in enacting a regulatory framework for DFS.
On the other end of the legal spectrum are those states that have taken a more relaxed approach to regulating the DFS marketplace. In April of this year, Arkansas enacted HB2250. Unlike its Colorado counterpart, HB2250 does little in terms of consumer protection with no designation for “highly experienced players”, no segregation of funds, and no licensing or background check requirements. Instead, HB2250 finds that paid fantasy sports does not constitute gambling, and allows for DFS to exist in exchange for an 8 percent tax on gross revenue based on Arkansas proceeds.
These two states demonstrate some examples how states are evaluating the DFS economy. It’s unclear which approach, if any will, be widely adopted or whether significant regulation will hamper growth in the DFS marketplace. Nonetheless, one thing is certain: A patchwork of regulations will increase the legal complexity and expense of DFS enterprises.