Tennessee’s Sports Wagering Advisory Council (SWAC) welcomed the first public comment period regarding the state’s revised sports betting rules on Tuesday. One particular subject came up multiple times: Tennessee’s 10% minimum hold requirement.
Public comments emphasize Tennessee’s 10% hold requirement
Today was the first chance for interested parties to voice opinions on the newest draft of Tennessee sports betting regulations.
The Rulemaking Committee — chair Tom Lee and members Samuel Lee and Kandace Stewart — met twice to produce a draft proposal. This public comment period serves as the next step, allowing parties to discuss their opinion on the proposed rules.
Five corporations ultimately weighed in; however, six entities and one individual were to comment initially:
Josh Pearl and Alexander Graham of Penn Interactive opened by emphasizing the importance of maximizing revenue while treating patrons as valued guests rather than customers.
Pearl suggested that while the state legislature was clear on its intent to maximize revenue, the current 10% hold requirement was never a specific prerequisite. Therefore, this hold may not be the state’s best mechanism for growth.
He noted it is an unprecedented requirement in the US, citing an average 4.64% hold in Nevada and a 7.03% hold across all legal states.
In Tennessee, operators must either increase the “vig” or decrease payout odds. This limits the state’s growth potential and encourages players to explore illegal options or visit bordering states.
Rick Lomardo, BetMGM’s vice president of government affairs, said removing the requirement would prove good for consumers who shop to find the best return for their dollar. A high hold stunts market growth and limits customer willingness to join the legal wagering market.
SWAC chairman Billy Orgel agreed that while sports betting is a nice revenue producer for the state and can ultimately help the Tennessee community, it shouldn’t be done while taking advantage of those gambling above their means.
Fellow SWAC member Haynes Torbett then reminded the council discussed a 5% hold initially. Although they went with 10%, the caveat was that they would readdress the issue down the line.
Lomardo proposed letting the hold naturally set its percentage within the market. Some months would produce higher holds than others, depending on the particular sporting events taking place. Ultimately though, percentages would even out across the year.
Dean Hesterman, vice president of issues management at Caesars Entertainment, said that Tennessee could expect to see a hold pattern similar to Nevada without a required hold percentage. In this original sports betting state, hold never sees an average of more than 8%.
Hesterman explained that hold requirements force operators to promote wagers that are less favorable to customers. As Caesars nears the annual hold review period, the sportsbook will have to push players towards parlays and begin offering less of its popular “super boosts.”
He continued, expanding on how a hold requirement could eventually limit the potential of Tennessee’s legal sports betting market. In Washington, DC, for instance, an auditor discovered that improved sportsbook odds led to an increase in betting.
Kevin Cochran, senior manager of government affairs and senior corporate counsel at DraftKings, was the final representative to address the 10% hold requirement.
And, as if the regulation is a stark contrast to other jurisdictions wasn’t enough, the SWAC’s proposed quarterly assessments could put operators in even more of a bind. A Super Bowl win from the Titans, for example, would undoubtedly result in a major payday for Tennessee bettors. Volunteer State sportsbooks, on the other hand, would suffer a substantial loss.
A similar scenario occurred in Rhode Island in February 2019. The New England Patriots won the Super Bowl and covered the spread, resulting in a negative payday for sports betting operators.
In this situation, sportsbooks would have to adjust odds for the rest of the year to make up for losses. Adhering to Tennessee’s 10% annual hold becomes even more challenging if the hold is assessed quarterly.
Cochran said when an operator has to prioritize compliance over user experience, sportsbooks run the risk of providing a sub-par product.
Lachlan Murray, the chief financial officer of Buddy Bet, joined the discussion remotely from Australia. This time, concern veered in a different direction. Murray addressed that the new draft rules fail to mention peer-to-peer wagering, suggesting that SWAC include its stance within the rules.
Similar to Wagr, a social sports betting platform recently approved in Tennessee, Buddy Bet offers customers the ability to place casual social wagers.
Public comment period on TN sports betting rules continues
Those interested in commenting on Tennessee’s revised sports betting regulations can submit written comments to [email protected].
Parties have until the close of business on Tuesday, Oct. 19, to submit a comment.
The SWAC will tentatively hold its next meeting at 11 a.m. Tuesday, Nov. 9.