Player Funds And Required Reserve

(1) Player funds. (a) A Fantasy sports operator shall not allow a player to transfer funds from one player account to any other player account through its fantasy sports contest platform. (b) After a player’s identity has been verified, a player must be allowed to withdraw funds maintained in his or her active account. Such requests must be honored within five (5) business days of the request, unless the Fantasy sports operator believes in good faith that the player engaged in either fraudulent conduct or other conduct that would put the Fantasy sports operator in violation of the law, in which case the Fantasy sports operator may decline to honor the request for withdrawal for a reasonable investigatory period until its investigation is resolved, provided that it gives notice to the player of the nature of the investigation of the account. If an identity-verified player seeks to make a withdrawal from a deactivated or otherwise inactive account, the Fantasy sports operator shall follow its policies and procedures from processing such withdrawal requests in a commercially reasonable time. For purposes of this provision, a request for withdrawal will be considered honored if it is processed by the Fantasy sports operator notwithstanding a delay by a payment processor, credit card issuer, or the custodian of a financial account. (c) A Fantasy sports operator shall not allow a player’s account to be overdrawn unless caused by payment processing issues outside of the control of the Fantasy sports operator. (d) A Fantasy sports operator shall neither extend credit to a player nor allow the deposit of funds into an account that is derived from the extension of credit by affiliates or agents RULES RELATED TO THE FANTASY SPORTS ACT CHAPTER 1350-05 of the operator. For purposes of this subsection, credit shall not be deemed to have been extended where, although funds have been deposited into an account, the operator is awaiting actual receipt of such funds in the ordinary course of business. (2) Protection of player funds and required reserve. Funds held in player accounts and all funds constituting prize funds owed, or that may be owed based on contest participation, to player accounts of Tennessee consumers shall be protected in one of the following ways: (a) the creation and maintenance of a reserve as set forth in Rule 1350-05-.08(2)(a); (b) by deposit in a special purpose segregated account that is maintained and controlled by a properly constituted corporate entity as set forth in Rule 1350-05-.08(2)(b); or (c) by deposit in a qualified escrow account as set forth in Rule 1350-05-.08(2)(c). (a) Reserve. A Fantasy sports operator may maintain a reserve in the form of cash, cash equivalents, payment processor reserves and receivables, an irrevocable letter of credit, a bond, or a combination thereof to protect player funds. 1. The amount of the reserve shall be equal to, at a minimum, the sum of all authorized players’ funds held in player accounts of Tennessee consumers for use in fantasy sports contests plus all prize funds that are owed, or that may be owed based on contest participation by Tennessee consumers, until payment is made on the prize. 2. The reserve agreements must reasonably protect the reserve against claims of the operator’s creditors other than the authorized players for whose benefit and protection the reserve is established, and must provide that: (i) The reserve is established for the benefit and protection of authorized players to the extent the Fantasy sports operator holds money in player accounts for players. (ii) The reserve must not be released, in whole or in part, except upon written instruction or approval of the Sports Wagering Council. The reserve must be available within sixty (60) days of the written demand or written instruction. If the reserve is released to the Sports Wagering Council, he or she may interplead the funds in the Davidson County Chancery Court for distribution to the authorized players for whose protection and benefit the account was established and to other such persons as the court determines are entitled thereto, or shall take such other steps as necessary to affect the proper distribution of the funds, or may do both. (iii) The Fantasy sports operator may receive income accruing on the reserve, without obtaining permission from the Sports Wagering Council. (iv) The Fantasy sports operator has no interest in or title to the reserve. (v) Tennessee law and this section govern the agreements and the operator’s interest in the reserve and income accruing on the reserve. 3. If the reserve is maintained in the form of cash, cash equivalent, or an irrevocable letter of credit, it must be held or issued by a federally insured financial institution. If the reserve is maintained in the form of a bond, it must be written by a bona fide insurance carrier. Reserves in the form of cash, cash equivalent, and irrevocable letter of credit must be established pursuant to a written agreement between the Fantasy sports operator and the financial institution or insurance carrier, but the Fantasy sports operator may engage an intermediary company or agent to deal with the financial institution or insurance carrier, in which event the reserve may RULES RELATED TO THE FANTASY SPORTS ACT CHAPTER 1350-05 be established pursuant to written agreements between the Fantasy sports operator and the intermediary, and the intermediary and the financial institution or insurance carrier. 4. The proposed reserve arrangement is not effective for purposes of complying with Rule 1350-05-.08(2) until the Sports Wagering Council’s approval has been obtained. 5. The reserve arrangement agreements may be amended only with the prior written approval of the Sports Wagering Council. (b) Special purposes segregated account with a separate corporate entity. A Fantasy sports operator may establish a special purpose segregated account that is maintained and controlled by a properly constituted corporate entity that is not the Fantasy sports operator and whose governing board includes one or more corporate directors who are independent of the Fantasy sports operator and of any corporation related to or controlled by the Fantasy sports operator. 1. The special purpose segregated account with a separate corporate entity must hold, at a minimum, the sum of all authorized player funds held in player accounts of Tennessee consumers for use in fantasy sports contests, plus all prize funds that are owed or that may be owed, based on contest participation by Tennessee consumers, until payment is made on the prize. 2. The special purpose segregated account must reasonably protect the funds against claims of the operator’s creditors other than the authorized players for whose benefit and protection the special purpose segregated fund is established, and must provide that: (i) The segregated account is established for the benefit and protection of authorized players. (ii) The Fantasy sports operator may receive income accruing on the segregated account. However, the Fantasy sports operator has no interest in or title to the segregated account. (iii) The funds in the segregated account held for the benefit of Tennessee consumers may only be distributed for the following: (I) To the Fantasy sports operator for payment to players upon completion of fantasy sports contests or otherwise for the reconciliation of player accounts; (II) For income earned on the account, to the Fantasy sports operator; (III) To the Sports Wagering Council in the event that the Fantasy sports operator’s license expires, is surrendered, or is otherwise revoked, the Sports Wagering Council may interplead the funds in the Davidson County Chancery Court for distribution to the authorized players for whose protection and benefit the account was established and to other such persons as the court determines are entitled thereto, or shall take such other steps as necessary to affect the proper distribution of funds, or may do both; or (IV) As authorized in writing in advance by any agreement approved by the Sports Wagering Council. RULES RELATED TO THE FANTASY SPORTS ACT CHAPTER 1350-05 3. The corporate entity must require a unanimous vote of all corporate directors to file bankruptcy. 4. The corporate entity must obtain permission from the Sports Wagering Council prior to filing bankruptcy or entering into receivership. 5. The corporate entity must have articles of incorporation that prohibit commingling of funds with that of the Fantasy sports operator except as necessary to reconcile the accounts of players with sums owed by those players to the Fantasy sports operator. 6. The corporate entity must be restricted from incurring debt other than to fantasy sports players pursuant to the rules that govern their accounts for contests. 7. The corporate entity must be restricted from taking on obligations of the Fantasy sports operator other than obligations to players pursuant to the rules that govern their accounts for contests. 8. The corporate entity must be prohibited from dissolving, merging or consolidating with another company (other than a special purpose corporate entity established by another Fantasy sports operator that meets the requirements of this section) while there are unsatisfied obligations to fantasy sports players. (c) A Fantasy sports operator who solely operates season-long fantasy sports contests may establish a qualified escrow fund account for the benefit and protection of players’ funds. This account will be maintained by a financial institution approved by the Sports Wagering Council. 1. The Fantasy sports operator must enter into and execute an escrow fund agreement, the form for which is available from the Sports Wagering Council. 2. The Fantasy sports operator shall deposit in the escrow fund account the sum of all players’ funds held in players’ accounts belonging to Tennessee consumers for use in fantasy sports contests plus all prize funds that are owed, or may be owed, based on contest participation by Tennessee consumers, until payment is made on the prize. 3. All funds held in the escrow fund account shall be held, invested, and disbursed in accordance with the terms and conditions of the escrow fund agreement upon approval of the Sports Wagering Council. 4. The escrow fund agreement allows distribution of funds, and any income thereon, under very limited circumstances, and only upon express approval of the Sports Wagering Council for the following: (i) Distribution to the Fantasy sports operator for payment to players upon completion of fantasy sports contests up to a maximum of four (4) times per year. (ii) To the Sports Wagering Council in the event that the Fantasy sports operator’s license expires, is surrendered, or is otherwise revoked. The Sports Wagering Council may interplead the funds in the Davidson County Chancery Court for distribution to the authorized players for whose protection and benefit the reserve was established and to other such persons as the court determines are entitled thereto, or shall take such other RULES RELATED TO THE FANTASY SPORTS ACT CHAPTER 1350-05 steps as are necessary to affect the proper distribution of the funds, or may do both. (iii) To allow for the distribution of income to the Fantasy sports operator. 5. The escrow fund account shall be available only to those Fantasy sports operators who operate season-long fantasy sports contests that would require access to their escrow fund account for payment of claims no more than four (4) times per year. (d) Each Fantasy sports operator shall submit to the Sports Wagering Council all information and copies of documents verifying its proposed arrangements pursuant to Rule 1350- 05-.08(2), including copies of the agreement described herein. The Sports Wagering Council shall determine whether the agreements and arrangements satisfy the purposes and requirements of this section, may require appropriate changes, or withhold approval if they do not, and shall notify the Fantasy sports operator of the determination. (e) In the event that a Fantasy sports operator’s reserve, segregated account or escrow fund is not sufficient to cover, at a minimum, the sum of player funds held in player accounts belonging to Tennessee consumers for use in fantasy sports contests plus all prize funds that are owed or may be owed, based on contest participation by Tennessee consumers, until payment is made on the prize, the operator must, within twenty-four (24) hours, notify the Sports Wagering Council of this fact in writing and must indicate the steps the Fantasy sports operator has taken to remedy the deficiency. (f) The Sports Wagering Council may require that the reserve, segregated account, or qualified escrow fund, be increased to correct any deficiency or for good cause to protect authorized players.