Tennessee Lottery’s Progress Towards Sport Betting Slows After Key Meetings

Posted on February 20, 2020 - Last Updated on March 9, 2020

Meetings of the Tennessee Education Lottery’s board of governors this week produced some sports betting rules updates. The modifications prove that change isn’t always for the better.

While the state’s regulatory framework looks better now than it did before the meetings, there are still some clear problems.

The good news is the advisory board wants more time to work on getting the regulations right.  The bad news is that it looks like Tennesseans may have to wait even longer to start legally making wagers.

Parlay problem resolved, but advertising still TBD

The board addressed three of the most nefarious components of the proposed rules during the meeting. Those were:

  • A rule that governed the results of parlays
  • A hold requirement for sportsbooks of 15%
  • The time period for approval of sportsbooks’ promotional media.

The board repealed the rule that any leg of a parlay that results in a push creates a loss for the bettor. Tennessee would have been the only state with such a rule so far and such a standard flew in the face of standard practices in the industry.

Since that rule is gone now, individual sportsbook operators can decide for themselves how to handle that situation. Most sportsbooks simply treat a push as a push, rendering the parlay bet live.

The board also discussed a requirement that sportsbooks submit advertising materials to the Lottery for approval 30 days before using them. Operators have decried the regulation, saying it hinders their ability to react quickly to a fluid market. Many promotions center around recent news. With this mandate, it would hamper sports betting apps from offering such promotions.

One possible solution was creating categories under this premise. That could allow a faster turnaround time for things like posts on social media.

Another possible answer is codifying that such mediums are exempt from the rule. The Lottery could take a more reactionary stance in terms of policing such media, imposing consequences for posts that violate the regulations instead of approving them beforehand.

There will be more deliberation on that topic. The heaviest conversation focused on what to do with the 15% hold requirement.

Hold mandate making progress but still not resolved

The part of the proposed rules that received the most criticism was the hold requirement for sportsbooks. That rule stated that sportsbooks could pay out no more than 85% of handle.

The rule is problematic because it put sportsbooks in an unenviable position of having to manage their markets with the requirement, not organic market forces, in mind. Legal sportsbooks around the world often pay out as much as 95% of handle.

Board members were in agreement that 85% was an unreasonable threshold. However, there was dissent in regard to how to address the problem. Some members wanted to remove the requirement altogether while others merely suggested lowering the requirement.

On Wednesday, the board voted to lower the hold to eight percent. While that’s better than 15%, it still represents an artificial restraint that could hamstring the ability of legal sportsbooks in the state to compete.

What may become even more controversial, however, are additional delays. The latest timeline projections of mid-June are likely too optimistic.

TN sports betting could debut in time for football season

On top of expected delays to address legislators’ concerns, the changes and continuing discussions on the rules sets Tennessee back. It’s uncertain right now exactly how much.

The Lottery’s board received letters from State Speakers Randy McNally (Senate) and Cameron Sexton (House) for meetings. Both see some of the draft rules as falling outside the legislative mandate.

Because of the regulations yet to be resolved and the need to meet with the Speakers, the council has delayed voting to finalize the regulations. That means existing expectations are errant.

It’s likely now that legal sportsbooks in the state won’t be ready for the NBA and NHL playoffs as previously hoped. The final versions of the regulations probably won’t be ready until sometime in April.

After the first day of meetings, a Tennessee Lottery representative issued the following statement:

“We are committed to a thorough process that establishes and supports a responsible and competitive interactive sports gaming market in Tennessee. We received valuable feedback today from the Sports Wagering Advisory Council and the Sports Gaming Committee of the Tennessee Education Lottery Board of Directors. The Board will discuss the feedback tomorrow, but no action will be taken. We’ve set up meetings to discuss the Lieutenant Governor’s and Speaker’s questions.”

With so many concerns and unanswered questions, the calendar to get Tennessee sports betting apps licensed and launched is getting pushed back at least a couple of months.

The most optimistic timeline now seems to be the start of the next college football and NFL seasons. The only thing that seems certain is that everyone wants to have the product live sometime this year.

The regulatory framework for future potential legal sportsbooks in Tennessee looks better than it did last week. The outlook for those operators going live quickly, however, took a turn for the worse.

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Derek Helling

Derek Helling is a freelance journalist who resides in Chicago. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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