Final Sports Betting Regulations In TN Have More Issues Than Just The Hold Requirement

Posted on April 17, 2020

A couple of days after the Tennessee Lottery Board of Directors unanimously voted to adopt finalized TN sportsbook rules, they are now open to the public on the Lottery’s website.

This set of regulations bears extra importance. Tennessee is the first state to legalize sports wagering with no brick-and-mortar components. Because of that, its decisions could influence other states with similar legal gambling landscapes.

Why the TN sportsbook rules are far from perfect and how to address that situation

Few things in this world are ever perfect. That certainly applies to these sports betting regulations. The rules have strong points. There are many instances that the TN Lottery Board got right. Those include but aren’t limited to:

  • No mandate for sportsbook license holders to pay royalties to professional sports leagues
  • A competitive fee of $800,000 to acquire a Tier I (operator) license ($50,000 of which is the application fee)
  • No cap on the number of Tier I licenses the Lottery can issue
  • The explicit inclusion of esports as approved events

At the same time, the collective inexperience of the members of the Lottery Board showed in other parts of the regs. There are some real issues with the rules as they currently stand. The “low-lights” of those include:

  • A mandate for Tier I license holders to use official data for live wagers
  • An excessive 20% tax rate on handle
  • The dreaded 90% fixed payout cap on handle

The Lottery Board is free to adjust these rules at any time. Additionally, the TN Legislature could also force adjustments with legislation. However, either of those situations are unlikely to happen any time soon. There was some concern in the legislature that the Board was overstepping its authority in the regulations, but the bill has gone nowhere since early March.

Another way to force the Board to adjust or repeal undesirable parts of the regulations would be for private citizens in the state to file suit against the Board with the same allegations of the Board exceeding its mandate. In order to substantiate such a claim, however, the individual(s) have to be able to show the disputed tenets of the rules have done them harm.

As the Board just posted the rules, it is likely too soon to make such a claim. For the time being, this is the status quo. The worst aspect of the flaws of these regs is that other states with similar dynamics might see them as the gold standard.

Why other jurisdictions holding up TN’s current regs as an ideal could be a bad idea

Several other states, such as Alabama and Georgia, have legal gambling landscapes similar to TN’s. In both states, there are no legal casinos or racetracks with legal wagering. Georgia does have a state lottery, but Alabama does not.

There was a serious push to legalize sports betting in GA earlier this year. Although the suggested framework would have authorized wagering at brick-and-mortar facilities like the Atlanta Motor Speedway, most of the action would have transpired online.

Obviously legislators and regulators in other states carry the weight of the blame for such mistakes but every time a flawed rule becomes part of a legal framework, the idea that such provisions are sound policy gets reinforced. Hopefully, legislators and regulators in other states will use the bad decisions of others to avoid those errors in the future.

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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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