Tenn. Comp. R. & Regs. 1350-05-.03 - INITIAL APPLICATION FOR LICENSURE

(1) Application information. Any person seeking to be a licensed Fantasy sports operator shall submit an application to the Sports Wagering Council, using a form available from the Sports Wagering Council, with the following information:

(a) Name. The name of the applicant.

(b) Primary contact. The designated contact person for the applicant, a telephone number, address, and email address for that contact.

(c) Location. The physical address of the applicant's principal place of business.

(d) Disclosure of ownership. To the extent the information is within the control of the Fantasy sports operator, a complete disclosure of the true ownership of the Fantasy sports operator as follows:

1. For limited liability companies (hereinafter, "LLC"), including professional LLCs, provide the full name, address, and telephone number of each member of the LLC having an ownership interest of five percent (5%) or more of the LLC. If the member is not a natural person, disclose the true ownership of the member (and successive levels of ownership, if necessary) until a natural person or another corporate entity is disclosed. If another corporate entity is disclosed, provide a complete disclosure of that corporate entity's ownership in accordance with the specific rules for that entity contained herein (and successive levels of ownership, if necessary).

2. For general, limited, or limited liability partnerships, provide the full name, address, and telephone number of each partner having an ownership interest of five percent (5%) or more of the partnership. If the partner is not a natural person, disclose the true ownership of the partner (and successive levels of ownership, if necessary) until a natural person, or another corporate entity, is disclosed. If another corporate entity is disclosed, provide a complete disclosure of that corporate entity's ownership in accordance with the specific rules for that entity contained herein (and successive levels of ownership, if necessary).

3. For a corporation, provide the full name, address, and telephone number of any natural person or entity having an ownership interest of five percent (5%) or more of the outstanding shares of the corporation. If a corporate entity is disclosed, provide a complete disclosure of that corporate entity's ownership in accordance with the specific rules for that entity contained herein (and successive levels of ownership, if necessary).

4. The intent of this rule is to require, to the fullest extent that the individual or corporate structure of an applicant allows, disclosure of names of individual natural persons who have a significant ownership interest in a Fantasy sports operator.

(e) Criminal Record. The applicant's criminal record, if any, as specified below:

1. Information regarding the criminal record, if any, of the following individuals, if those individuals are involved in the day-to-day management of fantasy sports contests and/or operations, and as applicable to the entity's corporate structure:

(i) Each partner of a partnership holding five percent (5%) or more of the partnership;

(ii) Each member of a limited liability company holding five percent (5%) or more of the LLC;

(iii) Each director and officer of a non-publicly held corporation;

(iv) Each director and officer of a publicly held corporation, and/or operations; and

(v) Each stockholder of five percent (5%) or more of a corporation.

2. An applicant, and the individuals identified in subpart (e)1. above, shall have a duty to disclose on the application whether they have been convicted of a crime (other than traffic violations and convictions that have been expunged), and if so, the nature of the crime, the date, place of the conviction, and the legal disposition of the case.

3. An applicant, and the individuals identified in subpart (e)1. above, shall obtain a criminal background check (an "Identity History Summary") from the Federal Bureau of Investigation. The applicant must submit, with its application, either the completed Identity History Summary, or documentation showing that the Identity History Summary was requested prior to submitting the application.

4. Evidence of an applicant's (including any of the individuals identified in subpart (e)1. above) conviction or plea of guilty or nolo contendere for a felony, or a misdemeanor involving fraud, dishonesty, breach of trust, gambling, or moral turpitude, within the ten (10) years prior to the date of application shall be grounds for denial of an application.

(f) Interest in other Fantasy sports operators. Disclosure of any ownership interest held by (as applicable in accordance with the corporate structure of the entity) a policy making manager, a partner of a partnership, a member of a limited liability company, a director or officer of a corporation, a stockholder of five percent (5%) or more of a corporation, in any Fantasy sports operator, or any entity previously or currently licensed by another entity that licenses Fantasy sports operators or similar entities.

(g) Description of operations. A description and address of any physical facility operated by the Fantasy sports operator, if any, in this state, the number of employees, and the nature of the facility's business.

(h) Information regarding player deposits.

1. The applicant's policies and procedures for limiting each player to one continuous and active account.

2. The applicant's policies and procedures for limiting individual player deposits to no more than two thousand five hundred dollars ($2,500) per month.

3. The applicant's policies and procedures for temporarily or permanently increasing a player's deposit limit, at the request of the player, to an amount above two thousand five hundred dollars ($2,500) per month.

(i) Information and documentation regarding the reserve, segregated accounts, or Escrow Fund Account established pursuant to Rule 1350-05-.08(2).

(j) Information regarding verification of identity. A copy of the policies and procedures adopted to verify the identity of players seeking to establish accounts.

(k) Confirmation of tax clearance. A certificate of tax clearance issued by the Commissioner of the Tennessee Department of Revenue which states that the applicant is current on all taxes, fees, and penalties to the satisfaction of the Commissioner; or a statement that the applicant has no current obligation to the Commissioner because it is a newly registered entity in Tennessee.

(l) Confirmation of registration with the Division of Business and Charitable Organizations. A statement that the applicant is registered with the Secretary of State's Division of Business and Charitable Organizations, and the applicant's control number issued by the Division of Business and Charitable Organizations.

(m) Financial information. The Fantasy sports operator shall provide the following initial financial information:

1. The total amount of adjusted revenue earned by the Fantasy sports operator for the prior fiscal year.

2. A calculation of the resident percentage for the prior fiscal year.

3. The total amount of all winnings earned by fantasy sports players (including non-Tennessee consumers) for the prior fiscal year.

4. Audited financial statements prepared in accordance with the attestation standards established by the American Institute of Certified Public Accountants for the most recent completed fiscal year and audited or unaudited financial statements for the most recent completed fiscal quarter.

5. The Sports Wagering Council may inquire regarding additional financial information, or seek additional financial documentation, within his or her discretion.

(n) Information and documents concerning operational compliance.

1. The applicant's policies and procedures related to the prevention of minor participation in fantasy sports contests.

2. The applicant's policies and procedures related to advertisements, including the applicant's policies and procedures related to accurate representations concerning chances of winning and the number of persons winning.

3. The applicant's policies and procedures related to the applicant's compliance with the Federal Trade Commission, Guides Concerning Use of Endorsements and Testimonials in Advertising, compiled in 16 CFR § 255.

4. The applicant's policies and procedures relating to assistance available to problem gamblers.

5. The applicant's policies and procedures relating to implementation and enforcement of self-limitations and self-exclusions requested by players.

6. The applicant's policies and procedures related to protection of player deposits, including policies and procedures related to the following:

(i) Prevention of unauthorized withdrawals from player accounts by Fantasy sports operators or others;

(ii) Reporting and responding to complaints by a player regarding the handling of a player's account; and

(iii) Closure of player accounts.

7. The applicant's policies and procedures related to account monitoring to prevent misuse of accounts, including policies and procedures related to the following:

(i) Detection and prevention of misuse of proxy services;

(ii) Location verification;

(iii) Prevention of the use of unauthorized scripts; and

(iv) Prevention of the use of pre-selected teams.

8. The applicant's policies and procedures related to the prevention of unauthorized play by the following individuals:

(i) Fantasy sports operator employees, Fantasy sports operator contractors, and any spouse, children, or parents of any sports operator employee or contractor.

(ii) Professional or amateur athletes whose individual statistics or performance may be used to determine any part of the outcome of a fantasy sports contest; and

(iii) Any sports agent, team employee, referee, or league official associated with any athletic competition that is the subject of fantasy sports contests.

9. The applicant's policies and procedures relating to fantasy sports contests for beginning players, including policies and procedures related to the following:

(i) Explanation of contest play;

(ii) Identification of highly experienced players, including symbols or other identification used;

(iii) Recommending beginning player only contests and low cost private contests;

(iv) Percentage of contests open only to beginning players and that exclude highly experienced players;

(v) Prevention of access by highly experienced players to beginner player contests directly or through a proxy; and

(vi) Suspension of accounts of highly experienced players who participate in contests for beginning players only.

10. The applicant's policies and procedures relating to the locking of fantasy sports contests.

11. The applicant's policies and procedures relating to the restriction of the number of entries per fantasy sports contest per player.

(2) The application shall be signed by an officer or director, member, or partner, as applicable in accordance with the Fantasy sports operator's corporate structure.

(3) The applicant shall submit a nonrefundable application fee in the form of a check made payable to the Sports Wagering Council in the amount of three hundred dollars ($300). Review of the applicant's application will not begin until receipt of the application fee.

(4) The application, supporting documentation, and fee may be hand delivered or mailed to the Office of the Sports Wagering Council, Attn: Director; at 312 Rosa L. Parks Blvd., 8th Floor, Nashville, Tennessee 37243.

Notes

Tenn. Comp. R. & Regs. 1350-05-.03

Emergency rules filed June 16, 2023 to become effective July 1, 2023; effective through December 28, 2023. New rules filed September 15, 2023; effective 12/14/2023.

Authority: T.C.A. §§ 4-49-201 and 4-49-212(a).