Tennessee Lottery approves sports wagering rules

The Tennessee Education Lottery has approved sports betting rules and hopes to begin the application process for licensees next week.

The Tennessee Education Lottery (TEL) Board of Directors has approved rules and processes for sports wagering in Tennessee at a meeting held yesterday (April 15).

The Lottery hopes to begin accepting applications for sports wagering next week. This news comes after the state lottery published its draft rules for sports wagering in November 2019.

Tennessee sports betting rules

The TEL Board Chair Susan Lanigan said: “These rules reflect the significant work that went into establishing the processes and requirements for licensing and regulating interactive sports wagering in Tennessee. The Board thanks the TEL and the Sports Wagering Advisory Council for their thoughtful help and guidance.”

Tennessee’s Sports Wagering Advisory Council chair Billy Orgel said: “We enter a new phase of this undertaking, and on behalf of the Advisory Council, we look forward to continuing to provide advice and assistance in support of best practices for Tennessee.”

The approved rules set a $750,000 fee for Level I (sports betting operator) licenses and a $75,000 fee for a Level II (sports wagering supplier) license. On top of this, applicants will have to pay a nonrefundable $50,000 application fee.

Level III licenses, which relate to contractors, subcontractors and independent contractors that provide Level I or II licenses, will cost $7,500.

The TEL Board will have 90 days to approve or deny a sports wagering license application once a submission has been made. There is no limit on how many licenses may be issued by the state regulator, however, all applicants must meet the requirements set by the state.

In terms of taxation, operators will be taxed 20% of gross income which must be paid on a monthly basis. Marketing for sports wagering will also be tightly controlled and all promotional material for betting must be approved by the TEL at least 30 days before they are published.

However, the most controversial part of the approved rules is the fixed payout rate.

Tennessee’s fixed payout rate

With the approval of a fixed payout rate, Tennessee has become the first US jurisdiction to stipulate how much money sports betting operators may pay out on bets placed.

This was originally set at 85% but has now been amended to 90%. This essentially means that sportsbooks must “hold” or keep ay least 10% of all wagers on an annual basis.

The controversy stems from the downstream impact that this can have on sports bettors and may have an impact on how operators conduct business in the state.

The inclusion of a fixed payout rate may also lead to inferior pricing across some betting markets and could lead to sports bettors choosing to place wagers with illegal offshore or unregulated sportsbooks. This could also have a significant impact on the taxable revenue which can be allocated to Tennessee’s education funds.

TEL Board Chair Susan Lanigan said that the fixed payout rate will be discussed again in a years’ time.

The only other jurisdiction to consider a payout cap was Washington DC, where the DC Lottery pushed for an 80% payout cap. However, the DC Council didn’t include a payout cap in its final regulations.

Sports betting in Tennessee

In late May, Tennessee became the fourth state to legalize sports betting in 2019. Governor Bill Lee allowed the state’s sports betting bill to pass into law without his signature, despite being opposed to the expansion of gambling.

In a statement, Lee said: “I do not believe the expansion of gambling through online sports betting is in the best interest of our state, but I appreciate the General Assembly’s efforts to remove brick and mortar establishments. This bill ultimately did not pursue casinos, the most harmful form of gambling, which I believe prey upon poverty and encourage criminal activity.”

As there are no casinos in Tennessee, residents will be able to bet on sports online or via a sports betting kiosk.

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