What Is a Fantasy Contest Operator Bond?
A number of states are introducing fantasy sports laws in order to regulate this newly-emerging industry. The fantasy contest operator bond is a requirement in many states for fantasy contest operators who must be licensed or registered. There is no national requirement, so bond amounts and conditions vary.
Just like other surety bonds, the fantasy contest operator bond is a contract between three parties. Your fantasy contest business is the principal that needs to get bonded. The obligee is the state licensing authority. The surety is the third party that underwrites the bond and backs your company.
A fantasy contest operator bond protects the state in which the business operates, and the players that take part in fantasy sports games. If contest operators transgress applicable rules, the bond safeguards the interests of their users.
An affected party can file a claim on your bond in such cases. Proven claims can pose a serious challenge to your business. More information on how claims are handled is available in the Questions section below.
Questions about Fantasy Contest Operator Bond
Who needs to obtain a fantasy contest operator bond?
A number of states already require fantasy contest operators– including daily fantasy sports– to get registered or licensed in order to operate legally. Colorado, Indiana, Rhode Island, and Virginia are among them. They have introduced a requirement to obtain a fantasy contest operator bond along with the license.
The bond protects players of fantasy contests from any fraudulent activities that operators might engage in. More specifically, the bond amount functions as a security that is equal to the deposit amounts in fantasy sports players’ accounts. It guarantees that players will be able to obtain the money they have won from their accounts with the fantasy contest operator. The bond also guarantees that operators’ funds and the players’ funds will be kept separate, so that there are no financial misallocations.
Legislation in this field is changing fast. Before you start your fantasy contest operator business, you should check with your state authorities what requirements you need to meet.
How much does a fantasy contest operator bond cost?
As there is no nationwide bonding requirement for fantasy contest operators, the bond amounts depend on the authorities in your particular state. Your bond cost is also determined on the basis of the strength your overall finances.
In most cases, the bond amount that should be posted is dependent on the collected finances in the players’ accounts.
The bond amount that you are asked to provide is different from your bond premium. The latter is, in fact, only a fraction of the required amount. If you fall in the standard bonding market, you can expect bond rates in the range of 1%-4%.
Besides the required bond amount, your financial status is another strong determinant of your bond price. Your surety examines your business and personal finances carefully, including your personal credit score. Applicants with a solid credit history can expect lower bonding rates.
You can get a thorough overview of how your fantasy contest operator bond price is determined on our surety bond cost page.
Can I get a fantasy contest operator bond with bad credit?
Even if you are struggling with bad credit, with Lance Surety Bonds you can still get bonded and conduct business. We run our Bad Credit Surety Bonds program to assist applicants with low credit scores, tax liens, bankruptcies, or civil judgements.
The typical bonding premiums for bad credit cases are in the range of 5% to 10%. The higher price is there to compensate for the increased risk in the bonding. Our bonding agency works with a number of A-rated, T-listed surety companies, which is a guarantee that you are getting bonded at top rates and with solid backing.
How do I get my fantasy contest operator bond?
You can start the process of obtaining your fantasy contest operator bond today. Simply apply online by completing the form and attaching all relevant documents. We will assess your case and deliver your free, no-obligations bond quote in no time.
For more information on how bonding works, make sure to check out our How to Get Bonded page.
Lance Surety Bonds’ experts are here to help. For any questions and concerns, call us at (877) 514-5146 to get immediate assistance.
How are bond claims handled for fantasy contest operators?
The difference between your bond and your insurance is an important one. Bonds are required to protect the interests of your clients, and not those of your business. In case you do not fulfill your obligations towards players, the bond is there to guarantee they will be reimbursed.
In case you transgress applicable rules, an affected entity can file a claim on your fantasy contest operator bond. If proven, you will have to financially compensate the claimant. While the surety takes over the burden at first, all costs are eventually repaid by you.
It’s important to avoid claims at all costs. They can harm your company financially, but also in terms of reputation and ability to get bonded in the future.