Michigan Office of Administrative Hearings and Rules  
Administrative Rules Division (ARD)  
611 W. Ottawa Street  
Lansing, MI 48909  
Phone: 517-335-8658 Fax: 517-335-9512  
REGULATORY IMPACT STATEMENT  
and COST-BENEFT ANALYSIS (RIS)  
Agency Information:  
Department name:  
Treasury  
Bureau name:  
Michigan Gaming Control Board  
Name of person filling out RIS:  
Wendy Harns  
Phone number of person filling out RIS:  
517-335-2163  
E-mail of person filling out RIS:  
harnsw@michigan.gov  
Rule Set Information:  
ARD assigned rule set number:  
2020-11 TY  
Title of proposed rule set:  
Fantasy Contests  
Comparison of Rule(s) to Federal/State/Association Standard  
1. Compare the proposed rules to parallel federal rules or standards set by a state or national licensing agency or  
accreditation association, if any exist.  
Section 2(d) of the Fantasy Contests Consumer Protection Act, MCL 432.502(d), defines the term “fantasy contest” in  
a manner consistent with the Unlawful Internet Gambling Enforcement Act of 2006, 31 USC 5361 to 5367.  
Otherwise, there are no parallel federal rules or standards set by a state or national licensing agency or accreditation  
association.  
A. Are these rules required by state law or federal mandate?  
These rules are authorized under section 10 of the Fantasy Contests Consumer Protection Act of 2019, PA 159, MCL  
432.510, which provides that the “board shall promulgate rules to implement this act under the administrative  
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, including, but not limited to. . . any . . . rule the board  
determines is necessary to ensure the integrity of fantasy contests.” MCL 432.510(f). In addition, section 3(5) of the  
Fantasy Contests Consumer Protection Act, MCL 432.503(5), provides that the Board may promulgate rules related  
to the conduct of fantasy contests.  
B. If these rules exceed a federal standard, please identify the federal standard or citation, describe why it is  
necessary that the proposed rules exceed the federal standard or law, and specify the costs and benefits arising out  
of the deviation.  
There are no applicable federal standards.  
2. Compare the proposed rules to standards in similarly situated states, based on geographic location, topography,  
natural resources, commonalities, or economic similarities.  
MCL 24.245(3)  
RIS-Page 2  
Each state establishes its own laws, rules, and standards for licensing and regulation of fantasy contests. In drafting  
the proposed rules, the Board identified several key objectives, including: (a) implementing the requirements and  
public policy goals of the Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, to protect Michigan  
participants in fantasy contests; (b) creating a regulatory environment that is the least burdensome for those required  
to comply; (c) aligning corresponding provisions of the proposed fantasy contest rules with the Board’s existing  
gaming regulations, where practicable, to reduce the regulatory burden on impacted parties and improve regulatory  
efficiency; (d) leveraging the Board’s experience regulating casino gaming, internet gaming, and internet sports  
betting; and (e) recognizing that fantasy contests are not classified as casino gambling, internet gaming, or internet  
sports betting under state law and, therefore, may be held to a different regulatory standard.  
To assist in accomplishing these objectives, the Board analyzed laws and regulations of other jurisdictions relating to  
fantasy contests. Since fantasy contests are an interstate product, the proposed rules are intended to work in  
conjunction with other states’ regulations. Best practices and standard operating procedures from other jurisdictions  
are reflected throughout the proposed rules. In addition, the proposed rules incorporate feedback from industry  
stakeholders, many of whom operate in other jurisdictions and have practical experience navigating the regulatory  
landscape surrounding fantasy contests.  
The proposed rules are conceptually consistent with fantasy contest standards in similarly situated states. Similarly  
situated states include Indiana, Ohio, and Pennsylvania, which are comparable across several factors, including:  
authorization of fantasy contests; regulation of fantasy contests alongside forms of gaming (e.g., land-based casinos,  
internet gaming, internet sports betting, etc.); geographic location; market size; operating and regulatory structure;  
statutory requirements; and regulatory history and experience.  
The proposed rules are largely consistent with standards in similarly situated states in key areas that align with the  
public policy objectives of the Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, including  
licensing, fantasy contest player protection, procedures and internal controls, and audit. Where differences exist, such  
differences generally are immaterial and/or can be attributed to one or more of the following:  
(a)Rules designed to support and implement the requirements and public policy objectives of the Fantasy Contests  
Consumer Protection Act, MCL 432.501 to 432.516. Corresponding requirements may not exist or may differ in  
similarly situated states.  
(b)Rules that align with corresponding provisions of MGCB’s existing rules governing commercial casino gaming,  
internet gaming, and/or internet sports betting. This alignment will reduce the regulatory burden for persons required  
to comply with multiple rulesets and will improve regulatory efficiency for all persons subject to the proposed rules.  
(c)Rules designed to minimize the regulatory burden on persons required to comply. Certain requirements that exist  
in other states were modified or excluded, where deemed appropriate by the Board, to eliminate any unnecessary  
regulatory burden.  
(d)Rules that reflect and are considered necessary and appropriate based on the Board’s regulatory experience.  
(e)Rules designed to reduce ambiguity and provide greater certainty and clarity.  
A. If the rules exceed standards in those states, please explain why and specify the costs and benefits arising out of  
the deviation.  
The proposed rules are largely consistent with fantasy contest standards in similarly situated states and, in some cases,  
impose a lesser regulatory burden. Where the proposed rules exceed other states’ standards to a material degree, such  
deviations can generally be attributed to one or more of the factors listed above and, in the Board’s opinion, are  
necessary for the proper licensing and regulation of fantasy contests (including the protection of fantasy contest  
players). In general, the Board does not expect any deviations to substantially increase regulatory costs for fantasy  
contest operators and licensed management companies.  
3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the proposed  
rules.  
MCL 24.245(3)  
RIS-Page 3  
Generally, the proposed rules do not duplicate, overlap, or conflict with other laws, rules, or legal requirements.  
The Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, authorizes fantasy contests conducted by  
licensed fantasy contest operators, by casinos licensed under the Michigan Gaming Control and Revenue Act, MCL  
432.201 to 432.226, and by Indian tribes which lawfully conduct class III gaming in a casino located in Michigan and  
which hold a license under either the Lawful Sports Betting Act, MCL 432.401 to 432.419, or the Lawful Internet  
Gaming Act, MCL 432.301 to 432.322.  
The proposed rules do require fantasy contest operators and licensed management companies to comply with and  
notify the Board upon the happening of certain events under applicable provisions of the Bank Secrecy Act of 1970,  
31 USC 5311 to 5332, but only to the extent such provisions apply to the person’s fantasy contest operations.  
Moreover, a publicly traded corporation must also meet reporting requirements set forth by the U.S. Securities and  
Exchange Commission. The proposed rules do not extend to a fantasy contest operator or licensed management  
company any requirements of the Bank Secrecy Act of 1970, 31 USC 5311 to 5332, or U.S. Securities and Exchange  
Commission that are not already applicable to the person.  
A. Explain how the rules have been coordinated, to the extent practicable, with other federal, state, and local laws  
applicable to the same activity or subject matter. This section should include a discussion of the efforts undertaken  
by the agency to avoid or minimize duplication.  
The proposed rules have been coordinated, to the extent practicable, with applicable reporting requirements of the  
Bank Secrecy Act of 1970, 31 USC 5311 to 5332, and reporting requirements of the U.S. Securities and Exchange  
Commission.  
The Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, authorizes fantasy contests conducted by  
licensed fantasy contest operators, by casinos licensed under the Michigan Gaming Control and Revenue Act, MCL  
432.201 to 432.226, and by Indian tribes which lawfully conduct class III gaming in a casino located in Michigan and  
which hold a license under either the Lawful Sports Betting Act, MCL 432.401 to 432.419, or the Lawful Internet  
Gaming Act, MCL 432.301 to 432.322.  
Fantasy contests are authorized separate from casino gaming conducted under the Michigan Gaming Control and  
Revenue Act, MCL 432.201 to 432.226, internet sports betting conducted under the Lawful Sports Betting Act, MCL  
432.401 to 432.419, and internet gaming conducted under the Lawful Internet Gaming Act, MCL 432.301 to 432.322.  
Nevertheless, the proposed rules have been coordinated, to the extent practicable, with these laws and their related  
administrative rules. Efforts were undertaken to minimize duplication where appropriate.  
4. If MCL 24.232(8) applies and the proposed rules are more stringent than the applicable federally mandated  
standard, provide a statement of specific facts that establish the clear and convincing need to adopt the more  
stringent rules.  
MCL 24.232(8) does not apply to the proposed rules.  
5. If MCL 24.232(9) applies and the proposed rules are more stringent than the applicable federal standard,  
provide either the Michigan statute that specifically authorizes the more stringent rules OR a statement of the  
specific facts that establish the clear and convincing need to adopt the more stringent rules.  
MCL 24.232(9) does not apply to the proposed rules.  
Purpose and Objectives of the Rule(s)  
6. Identify the behavior and frequency of behavior that the proposed rules are designed to alter.  
MCL 24.245(3)  
RIS-Page 4  
The rules establish a framework for a secure, responsible, fair, and legal system of fantasy contests in Michigan.  
The Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, was enacted on December 20, 2019, and  
authorized the operation, conduct, and offering of fantasy contests which were already occurring in this state.  
By its own terms, the act was created to regulate the conduct of fantasy contests; to protect Michigan participants in  
fantasy contests; to require licensing of the operators of fantasy contests; to impose fees on the operators; to provide  
for the powers and duties of the Board in overseeing fantasy contests in Michigan; to prohibit violations of the  
Fantasy Contests Consumer Protection Act; and to prescribe civil sanctions and penalties.  
A. Estimate the change in the frequency of the targeted behavior expected from the proposed rules.  
There is no expected change in frequency of the targeted behavior.  
B. Describe the difference between current behavior/practice and desired behavior/practice.  
There is no difference between the current behavior and the desired behavior except fantasy contests will have a  
regulatory structure made to protect the public interest in a secure, responsible, fair, and legal system of fantasy  
contests.  
C. What is the desired outcome?  
The desired outcome of promulgating these rules is to administer, regulate, and provide for the enforcement of the  
Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516. As such, the promulgation of these rules will do  
all of the following:  
(a)Set requirements for fantasy contest operators to implement commercially reasonable procedures to prevent  
prohibited persons from participating in fantasy contests.  
(b)Set conditions and requirements for suspending a fantasy contest player account.  
(c)Set protections for fantasy contest players participating in a fantasy contest, including requirements for providing  
fantasy contest players with access to information on playing responsibly.  
(d)Set self-restriction and responsible gaming requirements.  
(e)Set requirements for applicants and licensees to identify key persons, designate at least one key employee, and  
inform the Board prior to anticipated or actual changes in key persons.  
(f)Set requirements for fantasy contests, fantasy contest player accounts, and fantasy contest platforms.  
(g)Define prohibited athletic events.  
(h)Set reporting requirements for fantasy contest operators and licensees.  
(i)Define types of records and the length of time that records must be kept.  
(j)Set the ways in which a fantasy contest player may fund his or her fantasy contest player account.  
(k)Set the qualifications, standards, and procedures for approval and licensure by the board of fantasy contest operators  
and management companies.  
(l)Prescribe requirements related to beginning players and highly experienced players.  
(m)Adopt procedures for contested case hearings in accordance with the administrative procedures act of 1969, 1969  
PA 306, MCL 24.201 to 24.328.  
(n)Set requirements for fantasy contest integrity monitoring.  
(o)Set procedures and internal controls.  
(p)Set independent audit requirements.  
7. Identify the harm resulting from the behavior that the proposed rules are designed to alter and the likelihood  
that the harm will occur in the absence of the rule.  
MCL 24.245(3)  
RIS-Page 5  
The regulatory structure is designed to protect the public interest in a secure, responsible, fair, and legal system of  
fantasy contests. The harm resulting from the behavior the proposed rules are designed to alter includes:  
(a)Offering fantasy contests in this state without a license, except as otherwise provided in the act.  
(b)Willfully failing to report, pay, or truthfully account for any license fee or tax imposed by the act, or willfully  
attempting in any way to evade or defeat the license fee or tax.  
(c)Cheating and the use of unauthorized scripts, proxy servers, and protected information to enter or participate in a  
fantasy contest.  
(d)Allowing an individual under the age of 18 to open, maintain, or use in any way a fantasy contest player account, or  
to participate, or attempt to participate in a fantasy contest.  
(e)Allowing a prohibited person to open, maintain, or use in any way a fantasy contest player account, or to  
participate, or attempt to participate in a fantasy contest.  
(f)Allowing persons to enter or participate in fantasy contests in a manner that undermines their fairness and integrity.  
In addition, continued proliferation of unregulated fantasy contests poses certain risks to both participants and the  
state, including:  
(a)Lack of mechanisms to ensure that persons involved in the conduct of fantasy contests are suitable and that profits  
are not used for illicit purposes.  
(b)Lack of mechanisms to protect fantasy contest players, their personal information, and their funds.  
(c)Lack of responsible gaming tools and programs, including self-restriction.  
(d)Lack of procedures to protect the integrity of fantasy contests and the athletic events which collectively determine  
the outcome of a fantasy contest.  
(e)Lack of revenue to the state in the form of taxes.  
(f)Lack of standards for the creation and use of fantasy contest player accounts, including age and identity verification  
and player security and privacy.  
(g)Lack of auditing to ensure fantasy contests are conducted in accordance with relevant standards.  
A. What is the rationale for changing the rules instead of leaving them as currently written?  
There are currently no rules.  
8. Describe how the proposed rules protect the health, safety, and welfare of Michigan citizens while promoting a  
regulatory environment in Michigan that is the least burdensome alternative for those required to comply.  
The proposed fantasy contest rules provide protections for the public in the following ways: (a) setting forth self-  
restriction and responsible gaming measures; (b) providing for fantasy contest integrity monitoring; (c) providing the  
Board with oversight capabilities; (d) providing protections for fantasy contest players when setting up an account,  
paying an entry fee, and participating in a fantasy contest; (e) setting qualifications, standards, and procedures for  
approval and licensure of fantasy contest operators and management companies; (f) adopting standards and procedures  
for the protection of fantasy contest players, their personal information, and their funds; (g) setting procedures and  
internal controls for fantasy contest operators and licensed management companies; (h) preventing prohibited persons  
from participating in fantasy contests; (i) preventing restricted individuals from participating in fantasy contests from  
which they are restricted; (j) preventing persons from participating in fantasy contests in a manner that would  
undermine their fairness and integrity; (k) ensuring the availability of fantasy contests open only to beginning players;  
and (l) ensuring players are provided with sufficient information regarding fantasy contests and fantasy contest player  
accounts. These measures are designed to protect the public interest in a secure, responsible, fair, and legal system of  
fantasy contests while at the same time promoting a regulatory environment that is the least burdensome alternative  
for those required to comply.  
9. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.  
There are currently no rules so none are obsolete or unnecessary.  
Fiscal Impact on the Agency  
MCL 24.245(3)  
RIS-Page 6  
Fiscal impact is an increase or decrease in expenditures from the current level of expenditures, i.e. hiring additional staff,  
higher contract costs, programming costs, changes in reimbursements rates, etc. over and above what is currently  
expended for that function. It does not include more intangible costs for benefits, such as opportunity costs, the value of  
time saved or lost, etc., unless those issues result in a measurable impact on expenditures.  
10. Please provide the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings  
for the agency promulgating the rule).  
The Board submitted a request for ongoing appropriation for $500,000 starting in fiscal year 2021. The Board  
received appropriations of $500,000 for fiscal year 2021 and $498,400 for fiscal year 2022. The Legislature approved  
an additional one-time appropriation of $225,000 for fiscal year 2021. These appropriations will cover the general  
administration of the Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516. The Board will need to  
hire and/or allocate staff to properly license fantasy contest operators and management companies that require  
licensure under the act and proposed rules. This includes hiring and/or allocating departmental technicians, financial  
analysts, and regulation officers to process applications including review for suitability. The Board will also hire  
and/or allocate auditors, analysts, regulation officers, and specialists to interpret and enforce the law, administrative  
rules, and procedures and internal controls. With the addition of staff, the Board will incur additional costs related to  
telecommunications, travel, office supplies, building occupancy, SWCAP, Civil Service annual assessment, and other  
administrative fees. The appropriations also include support for IT applications required for the new program,  
additional user license fees and renewals, document storage, and IT equipment. Additionally, the Board may need to  
contract with a consultant for assistance with more complex investigations related to suitability of applicants, sale of  
ownership, international conversion/translation, or any other potential situation that could require additional  
expertise.  
The Fantasy Contests Consumer Protection Act imposes taxes on fantasy contest adjusted revenues and requires a  
license fee to be paid by an applicant for a fantasy contest operator license. MCL 432.514, MCL 432.503(9). Tax  
revenue generated by fantasy contests for 2020 exceeded $1.4 million. Through August 2021, tax revenue generated  
by fantasy contests is nearly $1 million.  
11. Describe whether or not an agency appropriation has been made or a funding source provided for any  
expenditures associated with the proposed rules.  
Section 16(1) of the Fantasy Contests Consumer Protection Act creates the fantasy contest fund in the state treasury.  
MCL 432.516(1). Taxes provided for in the act are to be deposited into the fund. MCL 432.514(3). Upon  
appropriation, the Board can expend money from the fund to cover the costs of regulating and enforcing the act.  
MCL 432.516(3)(a). The Board has made a request for ongoing appropriation from the fantasy contest fund for  
$500,000 starting in fiscal year 2021. The Legislature approved appropriations of $500,000 for fiscal year 2021 and  
$498,400 for fiscal year 2022. An additional one-time appropriation of $225,000 was made in fiscal year 2021.  
12. Describe how the proposed rules are necessary and suitable to accomplish their purpose, in relationship to the  
burden(s) the rules place on individuals. Burdens may include fiscal or administrative burdens, or duplicative  
acts.  
The proposed rules are necessary to create a regulatory structure for lawful fantasy contests. Industry best practices  
and stakeholder feedback were referenced in developing the proposed rules, including: the procedures and internal  
controls; fantasy contest player account requirements; requirements for the conduct of fantasy contests; and  
independent audit requirements. To the extent licensing is provided for under other Michigan laws such as the  
Michigan Gaming Control and Revenue Act, MCL 432.201 to MCL 432.226, the Lawful Internet Gaming Act, MCL  
432.301 to MCL 432.322, and the Lawful Sports Betting Act, MCL 432.401 to MCL 432.419, the proposed rules  
allow for the waiver of certain requirements to lessen the burden on applicants and licensees. Overall, the Board  
believes any burden placed on applicants, fantasy contest operators, and licensed management companies is  
necessary to protect the public interest in a secure, responsible, fair, and legal system of fantasy contests, and is  
generally consistent with the burden that exists in other regulated jurisdictions that share the same objectives.  
A. Despite the identified burden(s), identify how the requirements in the rules are still needed and reasonable  
compared to the burdens.  
Any burden on an applicant, fantasy contest operator, or licensee is necessary to regulate fantasy contests.  
MCL 24.245(3)  
RIS-Page 7  
Impact on Other State or Local Governmental Units  
13. Estimate any increase or decrease in revenues to other state or local governmental units (i.e. cities, counties,  
school districts) as a result of the rule. Estimate the cost increases or reductions for other state or local  
governmental units (i.e. cities, counties, school districts) as a result of the rule. Include the cost of equipment,  
supplies, labor, and increased administrative costs in both the initial imposition of the rule and any ongoing  
monitoring.  
As new fantasy contest operators and licensed management companies begin to offer fantasy contests, tax revenue to  
the state will increase. There are no anticipated increases or decreases in revenues or costs to local governmental  
units as a result of the proposed rules. Any money remaining in the fantasy contest fund after Board expenditures for  
regulatory costs will be deposited into the state school aid fund. MCL 432.516(3)(b).  
14. Discuss any program, service, duty, or responsibility imposed upon any city, county, town, village, or school  
district by the rules.  
There are no anticipated or intended programs, services, duties, or responsibilities imposed on any city, county, town,  
village, or school district because of these proposed rules.  
A. Describe any actions that governmental units must take to be in compliance with the rules. This section should  
include items such as record keeping and reporting requirements or changing operational practices.  
There are no anticipated actions that a governmental unit must take to comply with these proposed rules. This does  
not include an Indian tribe that is a fantasy contest operator.  
15. Describe whether or not an appropriation to state or local governmental units has been made or a funding  
source provided for any additional expenditures associated with the proposed rules.  
No appropriations have been made to any other governmental unit because of these rules. No additional expenditures  
are anticipated or intended with the proposed rules.  
Rural Impact  
16. In general, what impact will the rules have on rural areas?  
The proposed rules are not expected to impact rural areas.  
A. Describe the types of public or private interests in rural areas that will be affected by the rules.  
The proposed rules should have no impact on public or private interests in rural areas.  
Environmental Impact  
17. Do the proposed rules have any impact on the environment? If yes, please explain.  
The proposed rules do not have an environmental impact.  
Small Business Impact Statement  
18. Describe whether and how the agency considered exempting small businesses from the proposed rules.  
To offer fantasy contests under the Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, a person  
must (1) hold a casino license under the Michigan Gaming Control and Revenue Act, MCL 432.201 to MCL  
432.226; (2) or be a federally recognized tribe which holds a license under either the Lawful Internet Gaming Act,  
MCL 432.301 to MCL 432.322, or the Lawful Sports Betting Act, MCL 432.401 to MCL 432.419; (3) or be licensed  
as a fantasy contest operator. It is unlikely any of these are small businesses.  
These rules also will apply to licensed management companies that manage the day-to-day fantasy contest operations  
of a fantasy contest operator. It is also unlikely these are small businesses.  
The Board elected not to require licensure of other suppliers and vendors (third-party providers) that provide goods  
and services to fantasy contest operators and licensed management companies. These are more likely to be small  
businesses.  
MCL 24.245(3)  
RIS-Page 8  
19. If small businesses are not exempt, describe (a) the manner in which the agency reduced the economic impact  
of the proposed rules on small businesses, including a detailed recitation of the efforts of the agency to comply  
with the mandate to reduce the disproportionate impact of the rules upon small businesses as described below (in  
accordance with MCL 24.240(1)(a-d)), or (b) the reasons such a reduction was not lawful or feasible.  
Third-party providers do not require licensure under the proposed rules. Because fantasy contests are a regulated  
industry, and certain fantasy contest operators must be licensed under the act, it is not possible to specifically exempt  
small businesses from the licensing requirements as it would create a disparity in regulation.  
A. Identify and estimate the number of small businesses affected by the proposed rules and the probable effect on  
small businesses.  
It is unlikely any small businesses will be affected by the proposed rules.  
B. Describe how the agency established differing compliance or reporting requirements or timetables for small  
businesses under the rules after projecting the required reporting, record-keeping, and other administrative costs.  
The Board did not establish separate compliance or reporting requirements for small businesses. However, third-  
party providers generally are not subject to the compliance and reporting requirements that apply to fantasy contest  
operators and licensed management companies under the proposed rules. To the extent practicable, the rules were  
drafted to be the least burdensome on all impacted persons.  
C. Describe how the agency consolidated or simplified the compliance and reporting requirements for small  
businesses and identify the skills necessary to comply with the reporting requirements.  
The Board did not consolidate or simplify compliance or reporting requirements for small businesses. Third-party  
providers generally are not subject to the compliance and reporting requirements that apply to fantasy contest  
operators and licensed management companies under the proposed rules.  
D. Describe how the agency established performance standards to replace design or operation standards required  
by the proposed rules.  
The Board did not establish performance standards to replace design or operation standards for businesses subject to  
the proposed rules.  
20. Identify any disproportionate impact the proposed rules may have on small businesses because of their size or  
geographic location.  
There is no disproportionate impact on small businesses because of their size or geographical location.  
21. Identify the nature of any report and the estimated cost of its preparation by small businesses required to  
comply with the proposed rules.  
It is not expected that small businesses will have any reporting costs under the proposed rules. Third-party providers  
generally are not subject to the reporting requirements that apply to fantasy contest operators and licensed  
management companies.  
22. Analyze the costs of compliance for all small businesses affected by the proposed rules, including costs of  
equipment, supplies, labor, and increased administrative costs.  
It is not expected that small businesses will have any compliance costs under the proposed rules.  
23. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses  
would incur in complying with the proposed rules.  
It is not expected that small businesses will have any costs for legal, consulting, or accounting services under the  
proposed rules.  
24. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without  
adversely affecting competition in the marketplace.  
There are no expected costs to small businesses that will cause economic harm or adversely affect competition in the  
marketplace because of the proposed rules.  
25. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser  
standards for compliance by small businesses.  
There are no rules that exempt or set lesser standards for compliance by small businesses; thus, there is no cost to the  
Board to administer or enforce such rules. The decision not to license third-party providers is not expected to  
materially impact Board revenue or costs.  
26. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small  
businesses.  
MCL 24.245(3)  
RIS-Page 9  
There is a public interest in establishing a secure, responsible, fair, and legal system of fantasy contests. To maintain  
the integrity, security, and fairness of fantasy contests offered in Michigan, fantasy contest operators and licensed  
management companies must be licensed and/or regulated and exempting small businesses or setting lesser standards  
of compliance is not an option. However, to the extent third-party providers are not licensed, the public interest is  
not harmed as the Board retains authority to hold a fantasy contest operator or licensed management company  
accountable for the actions of its third-party providers and require the removal of any third-party provider.  
27. Describe whether and how the agency has involved small businesses in the development of the proposed rules.  
No small businesses were involved in the development of the proposed rules. The Board solicited and considered  
feedback from industry stakeholders in developing the proposed rules. Feedback was received primarily from  
potential fantasy contest operators.  
A. If small businesses were involved in the development of the rules, please identify the business(es).  
No small businesses were involved in the development of the proposed rules.  
Cost-Benefit Analysis of Rules (independent of statutory impact)  
28. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.  
Regulated fantasy contests are new to Michigan and, therefore, estimates of the actual statewide compliance costs are  
unknown. Compliance costs are expected to be consistent with costs in other regulated fantasy contest markets, and  
generated revenues are expected to exceed compliance costs.  
Since fantasy contests are an interstate product, the proposed rules are intended to work in conjunction with other  
states’ regulations and present minimal barriers that would prevent companies from operating in Michigan. In fact,  
many of the regulated industry’s standard operating procedures and best practices are reflected in the rules. This will  
reduce or eliminate many compliance costs for fantasy contest operators and licensed management companies that  
operate in other states.  
Fantasy contest operators and licensed management companies may experience some additional costs to comply with  
operational and reporting requirements that are specific to Michigan (for example, obtaining Board approval of  
procedures and internal controls as required under the act).  
A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit from the  
proposed rules.  
Fantasy contest operators and licensed management companies will be directly affected by these rules and will bear  
the cost.  
The public will directly benefit from these rules by having a secure, responsible, fair, and legal system of fantasy  
contests in Michigan.  
For 2020, fantasy contest operators who conducted fantasy contests as provided for in section 3(3) of the Fantasy  
Contests Consumer Protection Act, MCL 432.503(3), reported fantasy contest adjusted revenues of $16.7 million and  
paid total fantasy contest taxes of more than $1.4 million. Through August 2021, fantasy contest adjusted revenues  
are more than $10 million with fantasy contest taxes of almost $1 million paid to the State of Michigan. These  
numbers show a financial benefit – to fantasy contest operators, licensed management companies, and the state –  
through participation in the regulated fantasy contest industry.  
B. What additional costs will be imposed on businesses and other groups as a result of these proposed rules (i.e.  
new equipment, supplies, labor, accounting, or recordkeeping)? Please identify the types and number of businesses  
and groups. Be sure to quantify how each entity will be affected.  
MCL 24.245(3)  
RIS-Page 10  
Fantasy contest operators and licensed management companies may incur some additional costs to comply with  
operational and reporting requirements that are specific to Michigan, but they are expected to be consistent with costs  
in regulated fantasy contest markets in other states. Exact amounts are unknown, but may include:  
(a)Administrative costs related to licensure.  
(b)Costs of Michigan-specific reporting requirements.  
(c)Costs to comply with certain requirements regarding the conduct of fantasy contests.  
(d)Cost to comply with certain fantasy contest account requirements.  
(e)Cost to comply with certain procedures and internal controls.  
(f)Costs to comply with independent audit requirements.  
The number of fantasy contest operators and licensed management companies is unknown. In 2021, seven operators  
have conducted fantasy contests in Michigan under section 3(3) of the act, MCL 432.503(3).  
Revenues generated by businesses that participate in the industry are expected to exceed these costs.  
29. Estimate the actual statewide compliance costs of the proposed rules on individuals (regulated individuals or  
the public). Include the costs of education, training, application fees, examination fees, license fees, new  
equipment, supplies, labor, accounting, or recordkeeping.  
Key persons are expected to experience minimal individual costs due to compliance with the licensing requirements  
established in the proposed rules. The rules are not expected to impose compliance costs on the public.  
A. How many and what category of individuals will be affected by the rules?  
Key persons will be subject to disclosure and investigation as part of an application for a fantasy contest operator  
license or management company license. Key persons include:  
(a)An individual who holds a 5% or greater ownership interest in an applicant or licensee, or in shares of an applicant  
or licensee  
(b)An individual who holds voting rights with the power to vote 5% or more of the outstanding voting rights of an  
applicant or licensee  
(c)A director of an applicant or licensee.  
(d)A managerial employee of an applicant or licensee who performs the function of principal executive officer,  
principal operations officer, or principal accounting officer, or an equivalent officer.  
(e)An affiliate of an applicant or licensee.  
(f)A director of an affiliate of an applicant or licensee  
(g)A managerial employee of an affiliate of an applicant or licensee who performs the function of principal executive  
officer, principal operations officer, or principal accounting officer, or an equivalent officer.  
B. What qualitative and quantitative impact do the proposed changes in rules have on these individuals?  
The impact will be minimal. Fantasy contests are a regulated industry where the key persons associated with fantasy  
contest operators and licensed management companies understand the need for scrutiny and disclosure to create a  
secure, responsible, fair, and legal system of fantasy contests in Michigan.  
30. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a result  
of the proposed rules.  
There are no cost reductions for businesses, individuals, groups of individuals, or governmental units because of the  
proposed rules.  
31. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rules. Please  
provide both quantitative and qualitative information, as well as your assumptions.  
The primary and direct benefit of the proposed rules is a secure, responsible, fair, and legal system of fantasy contests  
in Michigan. The secondary impact is to create a regulatory environment that is the least burdensome alternative for  
those required to comply. In addition, lawful fantasy contests are expected to generate tax revenue for the state  
school aid fund.  
32. Explain how the proposed rules will impact business growth and job creation (or elimination) in Michigan.  
MCL 24.245(3)  
RIS-Page 11  
As evidenced by the revenue already generated by fantasy contests, fantasy contest operators and licensed  
management companies will maintain or may experience a net increase in their business. It is likely some fantasy  
contest operators and licensed management companies will commence legal operation in Michigan for the first time.  
Some jobs may be created.  
33. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their  
industrial sector, segment of the public, business size, or geographic location.  
Individuals or businesses will not be disproportionately affected by the rules because of their industrial sector,  
segment of the public, business size, or geographic location. Licensed commercial casinos and certain tribes will not  
be subject to licensure as fantasy contest operators; however, this is required under the act, MCL 432.503(4).  
34. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the  
methodology utilized in determining the existence and extent of the impact of the proposed rules and a cost-  
benefit analysis of the proposed rules.  
The Board relied upon agency staff and its regulatory experience to determine the impact of the proposed rules. The  
Board also looked at other jurisdictions who currently regulate fantasy contests, as well as getting input from  
stakeholders.  
A. How were estimates made, and what were your assumptions? Include internal and external sources, published  
reports, information provided by associations or organizations, etc., that demonstrate a need for the proposed  
rules.  
The Board relied on agency staff and its regulatory experience to formulate estimates and assumptions and determine  
the need for the proposed rules. The Board also looked at other jurisdictions and relied on stakeholders when  
determining the existence and extent of the impact of the proposed rules.  
Alternative to Regulation  
35. Identify any reasonable alternatives to the proposed rules that would achieve the same or similar goals.  
To create a secure, responsible, fair, and legal system of fantasy contests in Michigan, there are no reasonable  
alternatives to the proposed rules.  
A. Please include any statutory amendments that may be necessary to achieve such alternatives.  
There is no reasonable alternative to the proposed rules.  
36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would  
operate through private market-based mechanisms. Please include a discussion of private market-based systems  
utilized by other states.  
No alternative to promulgated administrative rules, including private market-based mechanisms, is feasible to  
regulate fantasy contests. The Legislature has found it to be in the best interest of this state and its citizens to  
regulate this activity by establishing a secure, responsible, fair, and legal system of fantasy contests. Moreover, the  
Legislature charged the Board with supervising and ensuring the integrity of fantasy contests. MCL 432.503(5). The  
Board is not aware of any states that utilize a private market-based system, as opposed to a state regulatory body, for  
this purpose.  
37. Discuss all significant alternatives the agency considered during rule development and why they were not  
incorporated into the rules. This section should include ideas considered both during internal discussions and  
discussions with stakeholders, affected parties, or advisory groups.  
Due to the nature of fantasy contests, no significant alternatives to reasonable regulation were considered during the  
development of the proposed rules. Significant provisions of the proposed rules are intended to align with the  
requirements and objectives of the Fantasy Contests Consumer Protection Act, MCL 432.501 to 432.516, and best  
practices observed in other states. The Board solicited feedback from industry stakeholders and incorporated many  
of their suggestions and revisions into the proposed rules.  
Additional Information  
38. As required by MCL 24.245b(1)(c), please describe any instructions regarding the method of complying with  
the rules, if applicable.  
MCL 24.245(3)  
RIS-Page 12  
The rules explicitly inform persons of most requirements, including but not limited to those pertaining to licensing,  
procedures and internal controls, the conduct of fantasy contests, self-restriction and responsible gaming, fantasy  
contest player accounts, independent audits, and remittance of taxes and fees. Other information, including forms  
and applications, will be available on the Board’s website.  
MCL 24.245(3)  
;