Bill Analysis - Senate Bill 688 Sports Wagering, Senate Commerce and Insurance (August 10, 2021)

Summary

Bill analysis of Senate Bill 688, Sports Wagering, 2021-2022 General Assembly, prepared for the Senate Commerce and Insurance committee and dated August 10, 2021, as of the Second Edition. It lists Perry and Lowe as the introducers and Nicholas Giddings and Erika Churchill, Staff Attorneys, as the preparers. The overview says the bill would authorize, regulate, and tax sports wagering in North Carolina, with the Lottery Commission responsible for issuing licenses, and would create the North Carolina Major Events, Games, and Attractions Fund, administered by the Department of Commerce, to provide grants. It states that Section 5 would be effective when the act becomes law and the remainder of the act would become effective October 1, 2021.

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SENATE BILL 688:
Sports Wagering.
2021-2022 General Assembly
Committee: Senate Commerce and Insurance. If favorable, Date: August 10, 2021
re-refer to Rules and Operations of the Senate
Introduced by: Sens. Perry, Lowe Prepared by: Nicholas Giddings and
Analysis of: Second Edition Erika Churchill
Staff Attorneys

OVERVIEW: Senate Bill 688 would do the following:
• Authorize, regulate, and tax sports wagering in North Carolina. The Lottery Commission would
be responsible for issuing licenses to involved parties and regulating sports wagering in North
Carolina.
• Create and provide funding for the North Carolina Major Events, Games, and Attractions Fund,
which would be administered by the Department of Commerce and provide grants for local
governments or nonprofit entities working with local governments to attract major
entertainment, musical, political, sporting, and theatrical events to the State that will stimulate
economic activity and create jobs.
[As introduced, this bill was identical to H631, as introduced by Reps. Saine, Hardister, Hawkins,
which is currently in House Commerce.]
CURRENT LAW: In 1992, Congress passed the Professional and Amateur Sports Protection Act
(PASPA), which effectively prohibited sports betting nationwide. However, PASPA grandfathered in
states that had legal sports gambling regulations in place at the time of the act taking effect1 and provided
states that operated licensed casino games for the previous ten-year period prior to the act taking effect a
one-year deadline to pass legislation permitting sports wagering. 2 In 2014, New Jersey repealed its
previous legislation prohibiting certain sports gambling in the state in an effort to challenge PASPA and
was sued by the NCAA, among others. The case made it to the United States Supreme Court which struck
down PASPA as unconstitutional in 2018.3 Since PASPA was overturned, states have been authorized to
legalize and regulate sports betting. Currently, over 20 states, plus the District of Columbia, authorize
sports betting in some capacity.
Sports wagering is not authorized in North Carolina generally; however, certain approved Indian lands are
authorized to conduct sports wagering in the State.4
BILL ANALYSIS: Senate Bill 688 would create Article 9 of Chapter 18C to authorize sports wagering
in North Carolina. The North Carolina State Lottery Commission (Commission) would be charged with

1
Only four sta tes had regulations in place: Delaware, Montana, Nevada and Oregon. Only Nevada authorized and regulated
sports betting of all types, while Delaware, Montana and Oregon authorized and regulated limited forms of sports betting.
2
New Jersey had operated licensed casino games for the previous ten-year period but did not pass legislation to authorize
sports wagering within the grace period afforded by Congress.
3
Murphy v. National Collegiate Athletic Association, 584 US ___ (2018).
4
G.S. 14-292.2. Currently, only the Eastern Band of Cherokee Indians and the Catawba Indian Nation have valid Compacts
with the State of North Carolina to conduct sports wagering in North Carolina.
Legislative Analysis
Jeffrey Hudson
Division
Director S688-SMBA-67(e2)-v-1 919-733-2578
This bill analysis was prepared by the nonpartisan legislative staff for the use of legislators in their deliberations and do es not constitute an official statement of legislative intent.
Senate Bill 688
Page 2

regulating sports wagering in the State. Wagers would be authorized via mobile devices, computer
terminals, or similar access devices in places of public accommod ation, which are defined as property
containing a sports facility, or property owned or controlled by the owner or operator of a sports facility
or affiliated with the owner or operator that is within one-half mile of the sports facility. A sports facility
is a facility that hosts professional sports with a minimum seating capacity of 17,000 people or is a facility
that hosts an annual professional golf tournament.
Sports wagers would be authorized on professional sports, college sports, electronic sports, amateur sports,
or any other event approved by the Commission. Electronic sports are competitions where individuals or
teams play video games, either in-person or online, for prizes, money, or entertainment. Amateur sports
are not professional, college or youth sports and includes domestic, international, or Olympic sporting
competitions.
Licenses
The Commission would be responsible for issuing licenses and collecting any license application fee.
Licenses would be valid for five years. Except for sports wagering supplier license applicants, all license
applicants as well as any directors or officers required by the Commission would be subject to extensive
background checks by the Commission. The licenses are as follows:
• Interactive Sports Wagering License – required to offer and accept sports wagers in North
Carolina. The Commission must authorize at least 10, but not more than 12, interactive sports
wagering licenses. If there are more than 12 applicants, the Commission, in its discretion, must
select the most qualified applicants. The application fees for an interactive sports wagering license
are as follows:
o Initial application fee: $500,000.
o Renewal application fee: $100,000.
• Service Provider License – required for a person to provide covered services to any interactive
sports wagering licensee. Covered services are services that involve the operation, management,
or control of sports wagers, including development or operation of a sports wagering platform and
the provision of odds and line information. It does not include payment processing, customer
identity, age verification, geolocation services, streaming or other video and data that does not
include odds or line information, telecommunications or internet service that is not designed for
sports wagering, or other goods or services not designed for use in connection with sports
wagering. The application fees for a service provider license are as follows:
o Initial application fee: $25,000.
o Renewal application fee: $10,000.
• Sports Wagering Supplier License – required to sell, lease, distribute, offer, or otherwise provide
services, goods, software, or other components necessary for the creation of betting markets and
determining bet outcomes, directly or indirectly, to any license holder or applicant involved in the
acceptance of bets. Upon approval of the Commission, a provisional sports wagering supplier
license may be issued prior to issuance of a sports wagering supplier license. A sports wagering
supplier license is not required for interactive sports wagering licensees that act as a sports
wagering supplier. The application fees for a sports wagering supplier license are as follows:
o Initial application fee: $15,000.
o Renewal application fee: $5,000.
Senate Bill 688
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Only registered players would be permitted to create an account and place wagers with an interactive
sports wagering licensee. The interactive sports wagering licensee would be responsible for ensuring the
identity and age of any registered player. A registered player must be at least 21 years of age. Individuals
would be allowed to voluntarily exclude themselves from placing sports wagers through a voluntary
exclusion program established by the Commission.
Civil and Criminal Penalties
The Commission would be authorized, subject to 15 days' notice and a hearing, to suspend or revoke a
license, impose a penalty of not more than $10,000 per violation of any licensee, or both.
The bill would create the following criminal penalties:
• Class 2 misdemeanor for knowingly offering or engaging in sports wagering in violation of the
Article.
• Class 2 misdemeanor for engaging in sports wagering when under the age of 21.
• Class G felony for knowingly attempting to collude or conspire to influence the outcome of a
competition subject to sports wagering in this State.
• Class I felony for any interactive sports wagering licensee or service provider licensee who
willfully gives false information on their license application.
Tax and Revenues
A tax of 8% would be levied on the adjusted gross revenue of each interactive sports wagering licensee.
Adjusted gross revenue includes all gross wagering revenue received by an interactive sports wagering
licensee minus winnings paid, costs of personal property distributed as a result of a sports wager, cash
value of bonuses or promotional credits provided to registered players which are returned in the form of a
deposit or wager, uncollectible receivables (up to 4%, unless a greater amount is authorized by the
Commission), and excise tax payments on sports wagers remitted to the federal government. The tax
would be due monthly to the Commission.
The Commission would be required to do the following with revenues, which includes the tax levied and
the license application fees collected:
• Remit 50% of the tax collected (does not include license application fee revenue) to the newly
created North Carolina Major Events, Games, and Attractions Fund.
• Reimburse itself for expenses in administering sports wagering in the State.
• Remit the revenues that remain to the Department of Revenue, which would credit the revenue to
the General Fund.
Guidance from Commission
The Commission would be responsible to provide guidance to parties regulated by the newly created
Article 9 of Chapter 18C. The guidance must address electronic sports with due consideration to the key
role of game publishers as creators of the underlying video game.
The Commission may accept license applications when the act becomes law; however, any license issued
would not become effective until October 1, 2021.
North Carolina Major Events, Games, and Attractions Fund
Senate Bill 688 would also create the North Carolina Major Events, Games, and Attractions Fund (Fund).
The Fund would be administered by the Department of Commerce (Department). The Department would
use revenues in the Fund to enter into multiparty agreements with site selection organizations and local
entities to provide grants to promote the attraction of major events to the State which stimulate economic
Senate Bill 688
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activity and create jobs. A major event is an entertainment, musical, political, sporting, or theatrical event
that satisfies certain criteria. Site selection organizations are organizations responsible for determining the
location of major events. A local entity, which is a city, county, or local organizing committee, would be
responsible for applying for a grant from the Fund. A local organizing committee is a nonprofit authorized
by a local government to work with site selection organizations with the goal of hosting a major event in
the State.
The Department, in conjunction with the Governor's Office, would be required to develop guidelines on
the administration of the Fund, the selection of projects to receive grants from the Fu nd, and the
disbursement of any grants awarded.
EFFECTIVE DATE: Section 5 of the act, requiring the Commission to issue guidance, would be
effective when the act becomes law. The remainder of the act would become effective October 1, 2021.

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