Tennessee Lawmakers Considering Change In Leadership On Sports Betting

Posted on February 24, 2020

Based on recent comments from Lt. Gov. Randy McNally, there could be a big change-up at the Tennessee Lottery regarding sports betting.

The Chattanooga Times Free Press reports that McNally said the state might give more power and control to the nine-member Sports Wagering Advisory Council.

“That definitely is something that could happen,” said McNally. “We got a real good advisory board, and I think its membership is something that we’re very proud of and it, I think, needs to be there to oversee what is going on.”

The nine members of the advisory council are a combination of appointees from the governor, the speaker of the Senate, and the speaker of the House. The panel currently includes a former FBI agent and several legal experts. Let’s recall the advisory council appointment process dragged on for several months, pushing back the TN sports betting launch.

While the council finalized appointees, the TN Lottery put together a set of regulations. The organization was ready to move forward on those rules, but then the criticism started rolling in.

New bill would put advisory council in charge of sportsbooks

The move to shift power from the Tennessee Educational Lottery (TEL) to the advisory council is more than just talk. A new House bill filed earlier this month would revise the sports betting law to put the council in more than just an advisory role.

Rep. Andrew Farmer and Sen. Steven Dickerson, both Republicans, are sponsoring the bill. Dickerson also sponsored the initial sports betting bill last year. The new bill is in the House as HB 2844 and as SB 2216 in the Senate. So far, the bill is still in respective committees.

Initially, the Sports Wagering Advisory Council’s role was to consult with the TEL as the board established and finalized regulations. However, the initial draft of the regulations drew substantial criticism. The feedback mostly focused on measures like the mandatory participation in the Global Lottery Monitoring Service (GLMS) and a 15% hold requirement.

Both are unprecedented mandates. The latter is so challenging that many in the industry believe a Tennessee sports betting market with it would have a disastrous economic effect on both sportsbooks and customers.

At the latest meetings of both the board and the advisory council, the hold mandate dropped to 8% after a vote. However, it would still make Tennessee the only state in the union with a mandatory hold percentage. The fact these problematic mandates were still in the regulations after last week’s meeting has several organizations in Tennessee and beyond nervous.

Lawmakers worry TN Lottery board is overstepping

The Times Free Press noted that Tennessee Lottery President Rebecca Hargrove and her team wanted to experiment with the higher mandatory hold in order to bring in more money for the designated Education fund. That measure certainly has its share of vocal critics, but TN lawmakers are more concerned with some of the licensing proposals.

Under the drafted regulations, there would be three tiers of licenses. The top tier would be the $750,000 license for sportsbook operators. Level II licenses would be for vendors utilized by operators, such as geolocation services. Those licenses are currently scheduled to cost $75,000. Level III licenses, which includes affiliates, cost $7,500 every three years.

McNally says he is not sure the law regulating sports betting allows for such license categories. The board may be overstepping the limits of the law by enforcing so many fees on nonoperators.

At last week’s advisory council meeting, the group voted to recommend dropping Level II fees to $10,000 and Level III fees to just $500. However, the board is welcome to take or leave the advisory council’s recommendations as they see fit, at least for now.

Nashville wants the TN Lottery to take its time

Both McNally and Speaker of the House Rep. Cameron Sexton wrote to the TN Lottery imploring them to delay voting on the proposed regulations at last week’s meeting. The board obliged and, according to a TN Lottery spokesperson, they are meeting with McNally and Sexton’s teams to discuss concerns.

In the meantime, the eyes are on the legislature to see if lawmakers move to switch control over to the advisory council before regulations are adopted and finalized.

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Jessica Welman

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