DALLAS, May 5, 2016 /PRNewswire/ -- On April 27, 2016, Tennessee Governor Bill Haslam signed Senate Bill 2109 (Public Law Ch. 978, effective July 1, 2016). The Fantasy Sports Act (FSA) confirms the Tennessee Attorney General Opinion No. 16-13 (April 5, 2016) (holding that fantasy sports contests were illegal gambling), stating that it is a violation under Tennessee Code Annotated section 39-17-503 for "any person to offer fantasy sports contests through an online digital platform that enables Tennessee consumers to participate in such contests without that person being licensed as a fantasy sports operator by the secretary of state."
The FSA establishes a six percent (6%) privilege tax, dubbed the Fantasy Sports Tax, on all adjusted revenues of fantasy sports contests offered by a fantasy sports operator to Tennessee consumers. The Tennessee Secretary of State ("Secretary") will administer the tax as well as other provisions of the FSA.
In order to become a licensed fantasy sports operator, a person must submit an application to the Secretary. Once licensed, the operator must maintain records of all player accounts for five (5) years from account creation, as well as submit annual reports. The Secretary must establish fees for applications, licensures, annual license renewals, late fees, correction of information, change of information, as well as online transaction fees for processing payments for applications. There are also several provisions prohibiting operators from targeting minors and providing contests based on high school or college sporting events whose participants are predominantly minors.
A violation of the FSA constitutes an unfair or deceptive act or practice affecting trade or commerce and will be subject to the penalties and remedies under the Tennessee Consumer Protection Act of 1977. Also, all fees and penalties and a portion of the tax levied under the FSA will be deposited into a fantasy sports fund to be used for administration of the FSA.
Tennessee is yet another state to address and/or regulate the fantasy sports business model. Indiana (S.B. 339), Virginia (S.B. 646), and Kansas (H.B. 2155) have also recently passed legislation. Further, other states' attorneys general, including Alabama, Mississippi, New York, and Texas have stated that such activities were illegal in their respective states. Tennessee's FSA does not go into effect until July 1, 2016, giving fantasy sports operators time to decide whether to register pursuant to the FSA or cease activity in the state.
 In 2012, Maryland enacted a law that excluded certain fantasy sports games from being treated as prohibited gambling activities. However, earlier this year, the Maryland Attorney general released an advisory questioning the 2012 law.
 Alabama News Release, Attorney General Determines Paid Daily Fantasy Sports Contests are Illegal Gambling (Apr. 5, 2016); Mississippi Attorney General Opinion No. 2015-00445 (Jan. 29, 2016); State of New York Office of the Attorney General, Cease and Desist Notice, November 10, 2015; Texas Attorney General Opinion No. KP-0057, January 19, 2016.
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