1. InComm Financial Services, Inc.
Daily Fantasy Sports:
Legal & Compliance
Nicole Ibbotson
General Counsel
InComm Financial Services, Inc.

2. InComm Overview Key Facts
InComm is a private company with 1700 employees in 5 continents and 34 countries
InComm is headquartered in Atlanta, Georgia
Founded in 1992, InComm is the leading global distributor and technology provider of gift card, prepaid and payment products at retail.
InComm touches 1 Billion consumers weekly
Over 500 brand partners (gift cards, financial services, bill pay, gaming, software downloads, tolling & transit, music & entertainment, wireless)
Financial Institution Status
In US, InComm is a registered federal MSB and licensed state MTL
In Europe, InComm is API
In other countries, hold equivalent of MSB, MTL or other alternative FI

3. Daily Fantasy Sports and the Federal Law
Federal Wire Act of 1961 (18 U.S.C. § 1084)
Prohibits interstate sports betting
2011 USDOJ opinion specifies that the Federal Wire Act only applies to sports betting
Unlawful Internet Gambling Enforcement Act (“UIEGA”) of 2006 (31 U.S.C. § 5361)
Prohibits transfer of funds from unlawful gambling
Carve out for fantasy sports
“…an outcome that reflects the relative knowledge of the participants…”
Leaves responsibility to states to define “unlawful gambling”

4. States’ Definitions of “Illegal Gambling”
Game can’t be operated for profit
Limits on wagers and winnings
House can’t take a cut
Game of chance or game of skill
Game of chance or game of skill is the most important and common definition
If the player is betting against the house : game of chance
If the player is betting against other players : game of skill
If the game involves using statistics and strategy in addition to pure chance : game of skill
Daily Fantasy Sports : Uses knowledge of players’ statistics BUT their performance is impacted by chance

5. States Avoided by DFS Operators
Arizona, Iowa, Louisiana, Montana and Washington
All online gambling is considered illegal
Recent progress in state legislatures to allow DFS has slowed or been defeated
DFS operators use a geoblock to prevent users in the five avoided states
Easily circumvented by VPN and proxy users
DFS responded by blocking all VPN and proxy users

6. Okay to Play: States Where DFS is Allowed
States that have expressly authorized DFS
Indiana, Massachusetts, Mississippi, New York, Tennessee, and Virginia
Heavily regulated by statutes
Age limitations
Gambling licenses
Wager limitations
Funds protection
States that have issued affirming statements without express authorization
Rhode Island
States that are statutory safe harbors
Kansas and Maryland
Indiana – EXCLUDES ALL COLLEGE SPORTS
Mass - Attorney General Maura Healy issued a white paper response with regulations
Rhode Island – February 2016 – AG issued positive opinion, but asks for regulations

7. State Attorney Generals with Negative Opinions
Alabama, Georgia, Hawaii, Idaho, Illinois, Maryland, Mississippi, Nevada, New York, Tennessee, Texas and Vermont
Superseded by legislation
Tennessee
Regulatory bill passed by the legislature in April
New York
Regulatory bill passed by the legislature in June
Signed by Governor in August
Temporary permits issued
Tennessee – HB 2254 – SB 2151 – 6% tax
New York – SB 8153 – Regulatory Control to NY State Gaming Commission
Licensed Operators pay a tax on gross revenue of 15%, as well as 0.5% tax with a cap of $50,000
Minimum age of 18
NO COLLEGIATE SPORTS

8. Partnering with DFS Operators
When evaluating a potential partnership with a DFS Operator consider:
Basic Due Diligence vs. Enhanced Due Diligence
Financial Review
Reputational Review
Anti-Money Laundering (“AML”)
Customer Identification Program (“CIP”)

9. Due Diligence Basic DD Enhanced DD Corporate Verification
Beneficial owners identification
Sanction lists screening
Politically exposed persons (PEP)
Understand DFS Operator activities and source of customer funds
Assess money laundering risks
Enhanced DD
Sr mgmt approval
Investigations and on-site visits
Certifications (contractual, source of funds, etc.)
Third party audits

10. Financial Review Initial and ongoing review of creditworthiness
Financial statements
Risk rating
Sensitive market
Dependent on state regulations
Industry valuation over the past year:
July 2015: FD and DK raise $1 billion in venture capital investments
February 2016: Fox marks down value of $160 million DraftKings investment to $65 million
February 2016: ESPN ends exclusive advertising deal with DraftKings ($200 million)
Summer 2016: Fantasy Sports Trade Association (“FSTA”) indicates growth in the industry

11. Reputational Review
Review public documents (news, litigation, consumer complaints)
2016 Class Action
Insider trading
DraftKings employee released data then won $350,000 on FanDuel in the same week
Employees no longer allowed to participate in DFS
Truth in Advertising
Bonus money to match initial deposit
Better Business Bureau
DraftKings and FanDuel both ranked A+ by the Better Business Bureau
200 Complaints
2 Million users

12. Anti-Money Laundering
BSA/AML may not apply to most DFS Operators
Likely not “financial institutions” as defined by BSA
Some may be casinos, currency exchangers, or other MSBs
DFS sites may suggest AML compliance is responsibility of bank/processor
Update Risk Assessment and AML Program
Implement, review and update controls for:
High value transactions
Quick intake and payouts (e.g. same-day pay)
Ease of repeated use
Geographic scope
Patterns of consistent routine winning

13. Customer Identification Program
Evaluate what DFS Operators do to verify identification of customers
At sign-up:
First and last name
Phone
Date of birth
Gender
At pay-out:
Different DFS Operators have different KYC:
Address
Photo ID
Paypal account
Proof of identity (last four of SSN)
Highly Skilled Players
Additional oversight necessary due to higher volumes of payouts
Transaction monitoring
Additional identity verification
Sanction list screening

14. Case Study: Vantiv, Inc.
Vantiv is a major payment processor for DraftKings and FanDuel
November 2015: Vantiv advises DraftKings and FanDuel to exit New York
DraftKings sues Vantiv to continue processing payments in New York
January 2016: Vantiv says they will no longer process payments for DraftKings and FanDuel as of February 29th
“An increasing number of state attorneys general have determined that daily fantasy sports (‘D.F.S.’) constitute illegal gambling.”
February 2016: Citigroup follows suit and says they will block transactions
“…until the courts make a final decision.”
Vantiv quote from Jonathan Ellman – Chief Transaction & Marketing Counsel
Citigroup quote from Jennifer Bombardier – Citigroup Spokeswoman
August 22nd 2016 – Courts clear the way for DFS in NY, so all operators are resuming