Six months after online sports betting became legal in Tennessee, state lottery officials are still finalizing the rules governing how licensees will operate. The Tennessee Education Lottery Corp.’s Board of Directors is scheduled to meet in Nashville on Feb. 19. That immediately follows the TEL Sports Wagering Advisory Council meeting to further discuss the draft regulations the lottery released in late November.
Dave Smith, TEL Communications Director, gave this public comment:
“The goal is the TEL Board of Directors votes on the rules and regulations at its February 19 meeting.”
It’s unsure whether lottery officially will be able to take applications after the meeting adjourn. State Rep. Rick Staples, who sponsored the bill legalizing sports betting in Tennessee, and other leaders are hopeful that they can start taking applications next month and start product rollouts beginning in March.
Tennessee to Exclusively Take Online Sports Betting Applications
In a stark contrast to how every other state that has legalized sports betting in the US has operated, Tennessee decided to go exclusively go with online sports betting applications, not requiring brick-and-mortar establishments.
The Tennessee Sports Gaming Act, passed by state legislators last spring, did not legalize physical gambling locations Currently, the state does not have any casinos. Because of this, lawmakers placed sports betting under the TEL’s discretion.
The Gaming Act enforces the following rules: Players must be at least 21 years of age and physically present in the state in order to place a bet, operators will need to pay an annual $750,000 licensing fee, and the state will impose a 20% tax on licensees’ adjusted gross income.
Sports Bettor’s Criticism Over Proposed Hold Rule
Tennessee’s innovative approach to sports betting, with the acknowledgement of how much mobile applications dominate in states that allow both retail and online establishments, has received high praise. Whereas other states, the handle for online betting far exceeds the amount brick-and-mortar sportsbooks take. In some cases, it’s as wide as an 80/20 split.
What’s not receiving critical acclaim amongst sports bettors however, is the proposed hold rate. The proposed rule would require sportsbooks to cap payouts at 85 percent. The resulting 15 percent hold is up to three times as much as the average rate for the sports wagering industry.
Robert Walker, Director of Sports Book Operations for US Bookmaking, tweeted this about the proposed hold tying into the Tennessee Lottery:
After reading Tennessee's insane argument for a 15 percent hold it's painfully clear that if your state lottery is involved in anyway it will be the absolute worst product available. Ripe with ineptitude or corruption or both.
— Robert Walker (@robertusfsports) January 15, 2020
Other aspects of Tennessee’s sports betting that have drawn criticism are its requirement for using official league data and its high tax rate.
Tennessee is one of only three states that requires sportsbooks to use official league data to score live betting opportunities, joining Illinois and Michigan. However, Tennessee’s law allows for an exception if the league cannot provide the data under “commercially reasonable terms.”
The state is also planning to tax licensees at 20% of their adjusted gross revenue every month. Out of all the states that generate its sports betting income off of taxes, that rate is a bit lower in comparison to Pennsylvania’s 36%.