Tennessee, Mississippi Legislatures Pass DFS Legalization Bills

Earlier this month, I began an article with the sentence, “The southern United States is becoming a tough place to play daily fantasy sports (DFS).”

Perhaps I spoke to soon. On Tuesday, the legislatures of two southern states – Tennessee and Mississippi – passed DFS legalization bills and sent them to the desks of their respective governors. Odds are, both will be signed and will become law.

Tennessee – SB 2109

The advancement of the Tennessee bill comes just a couple weeks after Attorney General Herbert Slatery issued a formal opinion, declaring DFS to be illegal according to state law. The opinion did not involve any moral bloviating, but was rather a simple legal analysis in response to a question posed by Tennessee House Minority Leader Craig Fitzhugh. At the end of the opinion, though, Slatery almost previewed what happened this week:

Thus, absent legislation specifically exempting fantasy sports contests from the definition of “gambling,” these contests constitute illegal gambling under Tennessee law. The General Assembly has the power to exclude from the definition of “gambling” any fantasy sports contest that is not prohibited by the state constitution or the federal constitution.

Both chambers of the legislature approved the DFS bill overwhelmingly; the Tennessee House of Representative voted in favor of it on Monday, 67-17, while the Senate gave it a 27-2 thumbs-up on Tuesday. The bill was sent to Governor Bill Haslam’s desk Thursday, April 21st, which starts a 10-business day clock for the Governor to mark it with his signature. Of course, he could veto it, but considering how easily it passed through both chambers, that is unlikely. Plus, since a veto can be overturned by only a simple majority of the legislature in Tennessee, a veto would probably be a fruitless action by Haslam (with 94 voting “aye” and just 19 voting “nay,” it would be quite surprising if all of a sudden the bill couldn’t get more “ayes” than “nays” in a re-vote).

It doesn’t look like there is anything terribly unusual about Tennessee’s bill. It requires fantasy sports customers to be at least 18 years old and imposes a six percent tax on DFS revenue derived from Tennessee players. Players funds, as one would expect, must be kept separate from operating funds. There is a player deposit ceiling of $2,500 per month, but that is flexible on a case-by-case basis.

Mississippi – SB 2541

Mississippi’s journey toward imminent DFS legalization was a touch more circuitous. In March, the state Senate passed the “Fantasy Contest Act” almost unanimously; just three Senators voted against it. But when it was sent to the House, it was as if everyone was taking crazy pills. The bill was completely re-written, changed to create a “Fantasy Contest Gaming Study Committee” and somehow launch a state lottery. Hell, the lottery amendment was even hand-written. Really, someone jotted down the amendment as sloppily as I jot down directions from Google Maps on a junk mail envelope when I decide I don’t want to waste a piece of printer paper and precious toner. The bill still passed by a huge margin – 83-37 – but it was basically now a lottery bill instead of a DFS bill.

Fortunately, they figured out a way to get the bill back to what is supposed to be. A special conference committee was created, composed of three Senators and three Representatives, tasked with fixing the mess. They did, purging the lottery silliness and creating a revised DFS bill that both the Senate and House passed easily.

It is still kind of weird, though. The law, if and when the bill becomes one, will actually expire next July 1st. Like Chappie believed himself, the bill was created to die. DFS would therefore become illegal, but everybody knows this, so if things are going well, one would expect the legislature to pass a permanent DFS regulation law before then. Still strange.

The rest of the regulations are similar to anywhere else. Minimum age 18, self-exclusion options, segregated funds, etc. Interestingly, operators would not be subject to a licensing fee, so the main barrier to entry in states that have either passed regulations or is looking at them is gone. This will certainly help smaller DFS sites. The original Senate bill prescribed an annual fee of the greater of $30,000 or five percent entry fees, which could have been devastating for small operators. If a site didn’t bring in enough money where five percent of that figure was more than $30,000, paying $30,000 would have been rough.

Like in Tennessee, it is now up to Mississippi Governor Phil Bryant to give his stamp of approval to the bill. And, like in Tennessee, he will probably sign it, given that it received so much support in the legislature that a veto would be pointless.