Tennessee Could Penalize Sports Betting Operators More In 2022 For Hold Violations

Posted on August 9, 2021

The Rulemaking Committee of the Sports Wagering Advisory Council convened virtually on Aug. 9, 2021. The three-person committee met to discuss updates to Tennessee sports betting regulations. Any newly-approved rules will go into effect in January 2022.

The committee reviewed the mandatory 10% hold requirement in Tennessee and what it will fine for violations going forward.

Members also covered how to deal with supplier and vendor applications starting next year.

Tennessee hold requirement remains, violations increase

After chair member Tom Lee called the meeting to order, the committee approved a motion to hold future rulemaking meetings virtually.

Once that was settled, the committee reviewed the 42-pages of single-spaced sports betting regulations. Lee mentioned that much of the previous wording will remain the same. However, the committee issued minor changes to some wagering definitions to clean up the language.

One major topic up for discussion was the current 10% hold requirement in Tennessee. This unprecedented requirement in the US sports betting industry makes Tennessee sportsbooks hold 10% of annual wagers, or cap payouts at 90% for the year.

It is a regulation that operators have consistently struggled to hit within the Volunteer State. Current hold for the year sits around 9%.

The committee decided it will keep the rule in place, but it wants to change its enforcement.

Currently, regulators can’t fine an operator more than $25,000 if it fails to meet the 10% hold requirement. Regulators assess any violations once a year.

Concerned that operators would see this nominal penalty as a simple cost of business, the committee proposed to enhance the impact of fines.

It suggested assessing operator’s hold on a quarterly basis, putting them at risk for up to $100,000 in fines instead of $25,000 for any violations.

Many of the committee members agreed with this proposed update.

SWAC stuck on how to handle suppliers and vendors

Not all decisions were as cut and dry as the hold requirement.

Lee noted that there would be no change in how an operator goes about getting a license going forward.

However, there will be a change for suppliers and vendors. Traditionally, the Tennessee Education Lottery (TEL) requires a $10,000 application fee for all suppliers and a $500 fee for vendors. The new rules will not include these.

As Attorney General J.P. Urban explained, the SWAC does not have the same authority as the TEL to charge these fees.

TEL vice president Alonda McCutcheon mentioned that along with the 137 vendors currently approved, an additional 50 vendor applications remain pending.

And of the 19 suppliers approved, another eight supplier applications are pending as well.

For now, suppliers and vendors must be approved by regulators before an operator can use them.

Without the staffing or the budget to thoroughly vet all of these applications, the committee could not decide on how to process these apps when the SWAC takes over. McCutcheon estimated a cost of $10,000-$14,000 in addition to staff fees in order to properly vet each applicant.

Lee’s suggestion was to put the operators on the hook for vetting the companies they would use to cut down on time and costs.

McCutcheon, however, saw potential issue with that. She believes that part of the regulator’s duty to the state is to ensure everything is properly presented.

She did note that the TEL had previously discussed expediting a vendor’s or supplier’s app if it was already approved in a different jurisdiction.

The committee did not come up with a final solution to this issue.

Other initiatives on the docket

The group reviewed a number of other rules during the meeting.

It will change how an operator requests for a new event to be approved for wagering.

The committee doesn’t want to create a new rule for each request that comes in, but it hasn’t come up with a final solution.

When it comes to suspending a license in the future, the Attorney General’s office suggested an update to due process requirements.

Adjusting the way an operator files a request for reconsideration and streamlining the process of dispute resolutions was also discussed.

Before a final vote is cast in November for all these new suggestions, the council will give the public an opportunity to provide input on the regulations.

The committee will reconvene on Wednesday, Aug. 18 at 2:30 p.m. CT.

The hour-long meeting will conclude with a vote on whether to recommend the discussed proposals to the SWAC.

Lee said the hope is to have a recommendation to the council by the time of its next full meeting on Tuesday, Aug. 24.

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Alec Cunningham

As a college athlete, Alec Cunningham played Division II golf at Tusculum University. She graduated in 2015 with a bachelor’s degree in Journalism and Professional Writing. Alec has spent the last five years working in the music industry as a concert promoter, tour manager and artist developer. As a journalist, she has covered a variety of topics and currently specializes in the Tennessee online sports betting industry.

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