Bill Summary for S 38 (2021)

Summary date: 

Jun 21 2022

Bill Information:

View NCGA Bill Details2021
Senate Bill 38 (Public) Filed Monday, February 1, 2021
AN ACT TO MODIFY SPORTS WAGERING REGULATION IN NORTH CAROLINA.
Intro. by Perry, Lazzara, Johnson.

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Bill summary

House committee substitute replaces the 1st edition with the following.

Section 1

Subject to SB 688 becoming law, makes the following changes to Article 9, Sports Wagering, GS Chapter 18C, as enacted by SB 688.

Adds geofencinginteractive account, and parimutuel wager to the Article's defined terms. Deletes adjusted gross revenue as a defined term. Excludes college sports rather than collegiate sports from the term amateur sports. More specifically defines covered services to include any service creating sports wagering markets and determination of sports wager outcomes that involve the operation, management, or control of sports wagers authorized by the Article, including the development or operation of the sports wagering platform and the determination of odds or line information (was the provision of odds and line information); makes technical and conforming changes. Makes clarifying changes to the term gross wagering revenue. Eliminates amateur sports from the term sporting event. Revises and expands the term sports facility to include a motorsports facility that hosts a National Association for Stock Car Auto Racing national touring race and has a minimum seating capacity of 17,000 people, and a facility that is the home location of a professional sports team that competes in one of six listed professional leagues, including Major League Baseball, the National Football League, and the National Hockey League. Amends the term sports wagering supplier to mean a person providing necessary components or services to any interactive sports wagering operator or service provider involved in the acceptance of sports wagers (was, any license holder or applicant involved in the acceptance of sports wagers); makes technical and clarifying changes. Changes the definition of sports wager or sports wagering to require all wagers to be placed using an interactive account (previously, required placement by any system or method of wagering, including online and mobile wagering), and expands the term to include wagers placed on a sporting event or a parimutuel wager (previously, included placing wagers on a portion of a sporting event or individual performance statistics of athletes). Makes technical and clarifying changes to the term youth sports

Amends GS 18C-902, which sets forth general authorization for sports wagering, to require all sports wagering to be placed using an interactive account compliant with GS 18C-912, which must be initiated and received within the State, except as provided for Indian gaming under GS 18C-928. Establishes requirements for interactive sports wagering operators, including (1) ensuring that the registered player placing a sports wager is located in the State and not on Indian lands, using geofencing, and (2) monitoring and blocking unauthorized attempts to place sports wagers. Adds new provisions making the Article inapplicable to interactive sports wagering conducted exclusively on Indian lands, as defined, by an Indian tribe operating under a Tribal-State gaming compact and authorized to conduct Class III gaming pursuant to the compact. Explicitly prohibits licensed interactive sports wagering operators from accepting any wager from registered players placing wagers while physically present on Indian lands, with the operators required to use geofencing to ensure compliance. No longer excludes parimutuel sports wagering on horse racing from the Article's scope. Makes technical and clarifying changes, including referring to fantasy contents players rather than participants, regarding fantasy or simulated games or contests excluded from the Article's scope. Adds that the Article does not authorize sports wagering on amateur sports. Makes changes to GS 18C-904 to no longer permit sports wagering on amateur sports with an interactive sports wagering license.

Amends GS 18C-904, increasing the interactive sports wagering license fee from $500,000 to $1 million. Regarding the North Carolina State Lottery Commission (Commission)'s consideration of license applications, requires the Commission to consider the amount of gross wagering revenue (was, adjusted gross revenue) and associated tax revenue that the applicant is projected to generate. Grants the Commission discretion to determine whether a person holding a license to engage in sports wagering by another state or territory should be licensed with or without further examination (previously, allowed for the Commission to grant the license without further examination). Regarding the Commission's 60 day period to review and issue licenses, gives the Commission the authority to extend the review period for an additional 30 days if the background check is outstanding. Adds a new requirement for interactive sports wagering operators to promptly notify the Commission of all changes in key persons, with all new key persons required to consent to a background check. Adds new provisions prohibiting assignment or transfer of interactive sports wagering operator licenses without Commission approval. Makes technical and clarifying changes.

Amends GS 18C-906, increasing the service provider license fee from $25,000 to $50,000. Similar to the changes for interactive sports wagering licenses, regarding the Commission's 60 day period to review and issue licenses, gives the Commission the authority to extend the review period for service provider licenses for an additional 30 days if the background check is outstanding. Grants the Commission discretion to determine whether a person holding a service provider license issued by another state or territory should be licensed with or without further examination (previously, allowed for the Commission to grant the license without further examination). Adds a new requirement for service providers to promptly notify the Commission of all changes in key persons, with all new key persons required to consent to a background check. Adds new provisions prohibiting assignment or transfer of service provider licenses without Commission approval. Makes technical and clarifying changes.

Amends GS 18C-907, regarding sports wagering supplier licensing, as follows. Eliminates provisions in subsection (a) which allowed for an interactive sports wagering operator to act as a sports wagering supplier without obtaining a separate supplier license, and required a sports wagering supplier to be licensed if providing sports wagering supplier services under a fixed fee or revenue sharing agreement. Makes technical and clarifying changes to subsection (b), relating to the issuance of provisional licenses at the request of the applicant, to require that a completed application have been submitted for the Commission to issue a provisional license. Increases the sports wagering supplier license fee from $15,000 to $30,000. Changes the license application requirements to include disclosure of principal owners who directly own 10% or more of the applicant (was, 5% or more of the applicant), disclosure of the applicant's board appointed CEO and CFO, or the equivalent as determined by the Commission (was, CEO and CFO), and any other information the Commission deems necessary (previously not included). Adds a new requirement for the Commission to conduct a background investigation on the applicant and key persons as deemed necessary by the Commission, including a credit history check, a tax record check, and a criminal history record check. Provides for acceptance of a criminal history check made within the previous 12 months as specified. Disqualifies an applicant or key person who has been convicted of a felony or any gambling offense within 10 years of application or renewal. Requires the applicant and key persons to consent to a criminal history check, and includes refusal as grounds to deny licensure. Sets a 60-day review period for completed applications and authorizes the Commission to extend the review period by 30 days if the background check is outstanding. Regarding principal owner disclosure, waives the applicant's disclosure of ownership and control, as determined by the Commission (1) governmental created entities that are direct or indirect shareholders, and (2) investment funds or entities registered with the SEC, including investment advisors and entities under the management of the SEC (previously more broadly excluded from any information disclosure requests in connection to the license application). More specifically deems a sports wagering supplier license or provisional sports wagering supplier license sufficient to offer sports wagering services under the Article. Grants the Commission authority to issue a license to a person holding a sports wagering supplier license issued by another state or territory, with or without further examination, as determined by the Commission. Bars assignment or transfer of sports wagering supplier licenses without Commission approval. 

Increases the renewal fees set forth in GS 18C-908 as follows: from $100,000 to $1 million for interactive sports wagering licenses; from $10,000 to $50,000 for service provider licenses; and from $5,000 to $30,000 for sports wagering supplier licenses. Adds to the grounds by which the Commission can deny a license, failure to pay the privilege tax imposed under Article 2E, GS Chapter 105 (as enacted), and expands the Commission's authority to include license revocation, in addition to license denial, based on the same grounds. Makes organizational changes. 

Enacts new GS 18C-909 to require the Commission to use the funds remitted to it from the proceeds of the privilege tax under Article 2E, GS Chapter 105 (as enacted) as well as license fee proceeds to cover expenses in administering the Article. Requires any funds remaining at the end of each fiscal year after payment of Commission expenses to be remitted to the General Fund. Specifies that Commission expenses are those listed in GS 18C-163 (previously included in GS 18C-921, repealed by the act). 

Amends GS 18C-910 as follows. Regarding licensed operators reporting duties, now includes reporting the location of the registered player at the time the sports wager was placed (was, the location of the wager). Makes further changes to refer to a registered player and a sports wager (was, a wagerer and a wager). Now requires licensees to conduct background checks on newly hired employees (was limited to interactive sports wagering operators). Now requires each licensed interactive wagering operator and service provider (was, operator only) to conduct a single background check on all employees as of the date of licensure. Now requires interactive sports wagering operators and service providers (was, operators only) to employ commercially reasonable methods to maintain the security of wagering data, registered player and other customer data, and any other confidential information from unauthorized access and dissemination. Adds a new provision to require each interactive sports wagering operator to provide a daily summary of all sports wagering activity, detailing all transactions processed through each wagering system, provided in a format established by the Commission at the close of each business day. 

Regarding sports governing bodies' notification to the Commission that it desires interactive sports wagering operators to use official league data to settle tier two sports wagers on sporting events of such sports governing body, does not require the operator to use only official league data within 60 days of the Commission's notification of the body's notice, if the designee of the sports governing body does not obtain a supplier license (was, if the sports governing body or its designee does not obtain a license) from the Commission to provide official league data to interactive sports wagering operators to determine the results of tier two sports wagers. 

Repeals GS 18C-920, which imposed an 8% tax on the adjusted gross revenue of interactive sports wagering operators; required the Commission to remit 50% of the tax collected to the NC Major Events, Games, and Attractions Fund (established in GS 143-437.112, as enacted by SB 688); exempt operators from excise tax, license tax, permit tax, privilege tax, amusement tax, or occupation tax, except as provided in the Article; and established reporting requirements for the Commission to submit to the Department of Revenue.

Repeals GS 18C-921, which mandated the Commission transfer $1 million of collections under the Article to the Department of Health and Human Services for gambling addiction education and treatment programs in addition to the amount transferred under GS 18C-163(a)(3). 

Amends GS 18C-922 to explicitly direct the Commission to establish the voluntary exclusion program for any individual to voluntarily exclude themselves from placing sports wagers, as previously described. Exempts the program from the public records laws set out in GS Chapter 132, and requires the program to be treated as confidential by each operator. Makes clarifying changes to consistently refer to the voluntary exclusion program rather than program. 

Amends GS 18C-926 to provide that permanent places of public accommodation for the purpose of accessing the registered player's interactive account either directly or with assistance from a person can be associated with each sports facility. No longer limits owners or operators of a sports facility to one place of public accommodation for the purpose of accessing a sports wagering platform through mobile devices, computer terminals, or similar access devices. Requires permanent places of public accommodation permitted to be located on the property of the sports facility (was on the property containing the sports facility). Prohibits more than one place of public accommodation to be on other property owned or controlled by the owner or operator of the sport facility or an affiliated entity of the owner or operator of the sports facility that is located within one-half mile radius of a sports facility that is either a motorsports facility or home location of a professional sports team as described in GS 18C-901(15)a. or GS 18C-901(15)c. Prohibits more than one place of public accommodation on other property owned or controlled by the owner or operator of the sports facility that is located within one and one-half mile radius of a sports facility that hosts a professional golf tournament as described in GS 18C-901(15)b. No longer allows for temporary places of public accommodation, except allows for one place of public accommodation to be temporarily established during a professional golf tournament as described in GS 18C-901(15)b.; excludes such accommodation from local ordinances and limits operation to no more than five days prior to the tournament and no more than five dats after the tournament. Now requires cashiers to distribute any monetary value to a registered player at a place of public accommodation. Adds a new requirement for all cashiers that accept or distribute cash or cash equivalents to be an employee of an interactive sports wagering operator. 

Amends GS 18C-928, specifying that a tribal gaming enterprise can be deemed a licensed sports wagering operator upon meeting certain described criteria without application under GS 18C-904. Revises the criteria to include locating any server or other information technology equipment directly related to the placing of sports wagering that is used by the enterprise and its agents to accept wagering on land that is not Indian lands and which is accessible to the Commission, Department of Revenue, and State law enforcement upon request. Adds a new provision to require Commission approval of the location of all other technology and servers used by a tribal gaming enterprise in connection with sports wagering. Makes conforming changes regarding the collection of applicable taxes. 

Section 2

Amends Senate Bill 688 by moving new Part 2L, North Carolina Major Events, Games, and Attractions Fund into Article 10, instead of Article 10B of GS Chapter 143B. Amends GS 143B-437.112, as enacted in Senate Bill 688, to provide that effective July 1 of each calendar year, the funds remitted to the North Carolina Major Events, Games, and Attractions Fund from the privilege tax on sports wagering under new GS 105-113.128 (see below) are appropriated for entering into multiparty agreements with site selection organizations and local entities to provide grants in accordance with the provisions of Part 2L. Makes a conforming change to the statutory cross-reference to the tax. Amends GS 143B-437.111, as enacted by Senate Bill 688, expanding the term major event, applicable to new Article 10, GS Chapter 143B, to include events sponsored by NASCAR.

Section 3

Amends GS 18C-114, as amended by Senate Bill 688, to allow the North Carolina State Lottery Commission (Commission) to charge a fee of lottery retailers, and of licensees and potential licensees not to exceed the cost of the criminal record check of the potential contractors and lottery contractors. Also removes charging a fee of interactive sports wagering operators. Amends GS 18C-120, as amended by Senate Bill 688, by amending the powers and duties of the North Carolina State Lottery Director to also include conducting a background investigation, including a criminal history record check, of licensee under GS Chapter 18C, and lottery contractors, and removes background investigations of interactive sports wagering operators. Amends GS 143B-947, as amended by Senate Bill 688, concerning the Department of Public Safety providing the North Carolina State Lottery Commission and its director with criminal histories of listed individuals by removing all references to interactive sports watering operators or service providers; adds in licensees or prospective licensees under CGS Chapter 18C. Makes additional conforming changes.

Section 4

Amends Section 5 of Senate Bill 688 to allow the Commission to accept and issue applications for licensure under Article 9 of GS Chapter 18C so that licensees may begin operating on January 1, 2023 (as, January 1, 2022). Provides that if more than 12 completed applicants are received, the Commission must select and notify the qualified applicants it determines will best serve the public interest in maximizing State revenue, while preserving the integrity of sports wagering and ensuring accountability and preserving the public trust in licensed sports wagering activities (removes the deadline for that notification). Provides that no license issued by the Commission will become effective prior to January 1, 2023 (was, January 1, 2022, but allowed before January 1, 2022, notified licenses to establish structure and operations to begin sports wagering on January 1, 2022.

Amends Section 6 of Senate Bill 688 to make Sections 1 through 4 of the act (enacting Article 9, enacting Part 2L, amending GS 18C-114, GS 18C-120, GS 143B-947, and the severability clause) effective January 1, 2023 (was, January 1, 2022).

Section 5

Adds new Article 2E, Privilege Tax on Interactive Sports Wagering Operators, providing as follows. Imposes a 14% privilege tax on an interactive sports wagering operator. Sets out a formula for determining the value of the privilege conferred upon the interactive sports wagering operator, which is the gross wagering revenue less the five categories of expenses. Requires the taxes to be paid monthly. Sets out record keeping requirements. Allows an interactive sports wagering operator a tax refund on a sports wager that has been refunded to the registered player. Allows the Secretary of Revenue (Secretary) to require an interactive sports wagering operator to furnish a bond in an amount that protects the State from an interactive sports wagering operator’s failure to pay taxes. Sets the amount of the bond at two times the interactive sports wagering operator’s expected monthly tax liability, provided the amount is no less than $50,000 and no more than $2 million. Allows an interactive sports wagering operator to substitute an irrevocable letter of credit for the secured bond. Sets out requirements for the letter of credit. Requires the Secretary to distribute the tax, less the allowance to the Department of Revenue and reimbursement to the Commission for administrative expenses. Allows the Secretary to retain the cost of collection, not to exceed $500,000 a year. Requires the Commission, no later than 20 days after the end of the month, to notify the Department of its expenses from administering the provision of Article 9 of GS Chapter 18C from the previous month. Requires the Department to reimburse the Lottery Commission no later than the end of the month in which the Department was notified. Requires the remainder of the net proceeds of the tax collected under the Article to be credited in the following priority: (1) the first $2 million annually to the Department of Health and Human Services for gambling addiction education and treatment programs in addition to the amount transferred under GS 18C-163(a)(3); and (2) 50% to the North Carolina Major Events, Games, and Attraction Fund and 50% to the General Fund. Applies to gross wagering revenue received on or after January 1, 2023.

Section 6

Amends GS 18C-114, as amended by Senate Bill 688, to further amend the Commission’s powers and duties and also include adopting and implementing any rules necessary to carry out the provisions of GS Chapter 18C, resolving any conflicts in the Chapter to the State’s best interest. Adds that the Commission and the Department of Revenue may agree to exchange any data necessary to enforce and administer Article 9 and new GS Chapter 105 Article 2E, including information deemed necessary to perform an audit of a licensee or taxpayer under those Articles. Makes conforming changes to GS 105-259. Enacts new GS 14-309.3 specifying that Article 37, Lotteries, Gaming, Bingo and Raffles, does not apply to sports wagering lawfully conducted in compliance with Article 9 of GS Chapter 18C.

Amends GS 14-309.20, which prohibits greyhound racing, to make an exception to the prohibition on transmitting or receiving interstate or intrastate simulcasting of greyhound races for commercial purposes, to allow it as authorized under Article 9 of GS Chapter 18C.

Section 7

Provides that if Senate Bill 688 becomes law, then the Commission must use sufficient funds from the North Carolina State Lottery Fund to cover the initial operating expenses of the Commission to implement Article 9 of GS Chapter 18C, provided that the total amount borrowed by the Commission does not exceed $14 million without further NCGA action. Requires the Commission to repay any funds used out of the Fund within 36 months after the act’s effective date.

Section 8

Requires the Commission to Study the restrictions on number of licensees as established by new GS 18C-904, and report its findings to the specified NCGA committee by October 1, 2024.

Changes the act's titles. 

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