Registration, License and Bond Requirements
On April 1, 2017, the State of Colorado will release the long-awaited application to register as a small fantasy contest operator (having 7,500 or fewer active players) or as a licensed large fantasy operator. Applicants that want to be active by July 1, 2017 will need to submit an application by June 1, 2017.
Legislation was passed in 2016 that allows fantasy game operators to offer games for an entry fee or a cash prize. The legislation also created a new regulatory program through the Colorado Division of Professions and Occupations which will oversee the registration, licensing and compliance of the program. The Division will also have the ability to adopt rules, set fees, and approve registration and license request.
Fantasy contest operators will need to apply for registration or a license. Licensed operators will be required to pay a license fee, however, small operators will be exempt from any registration fees. Applicants for large fantasy operators will need to submit fingerprints for a criminal history background check and must be able to pass the background check. An applicant may not be eligible as a fantasy contest operator if any of its owners, directors, officers or partners has been convicted of a felony or has entered a plea of nolo contendere.
In addition to the application process, fantasy contest operators will be required to keep daily records of its operations and maintain the records for a minimum of three years. Failure to main the records will result in civil penalties that can be up to $1,000 for each violation. Fantasy contest operators will not be able to use any device that replicates or qualifies as limited gaming (such as a video slot machine or roulette game). Large operators will also need to contract with a third party auditing company to review their records on an annual basis. A copy of the yearly audit must be placed on file with the Division.
In order to protect consumers, the new legislation has measures to prevent both employee and player abuse. Measures such sharing of confidential information, employees of fantasy contest operators are prohibited from competing in any cash prize games offered by the operator, disclosure of clear and concise contest rules, limiting of the number of entries a player may submit and more. (Further details can be found on page 7 of House Bill 16-1404.)
In addition to the many consumer protection clauses, the operator must keep contest player funds separate from operational funds. A bond will be required for the amount of the deposits made to the accounts of the contest players. In lieu of a bond, an irrevocable letter of credit or cash may be deposited with the state. A combination of a bond, cash or irrevocable letter of credit will be accepted.
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