Tennessee Still Ironing Out Kinks In Sports Betting Rules Ahead Of Projected Fall Launch

The Tennessee Education Lottery and its Sports Wagering Advisory Council held a meeting Tuesday in Nashville to continue fine-tuning rules for implementing the 2019 Sports Wagering Act.


Regulators are still eyeing a fall launch for sports wagering, according to remarks from Susan Lanigan, Chair of the TEL. The state wants to have sports betting in time for football.

The TEL and the Council discussed the fixed payout cap, arguably the most important item on the list of revisions to the rules. In November, the TEL released draft regulations that called for a 85% payout cap. After much debate and feedback from the industry, that cap was raised to 92% at February’s meeting.

On Tuesday, it was agreed upon to raise the cap to 95%. A payout cap is still a controversial rule, but 95% is much more favorable to the sports betting industry than 85% or even 92%.

That means that sportsbooks can’t pay out more than 95% of the handle to gamblers over a set time frame. The TEL is likely to go with three years. There was more discussion Tuesday to remove the cap entirely, but it has strong support from TEL CEO Rebecca Hargrove, who said it’s common in international markets where a lottery regulates sports betting.

Sportsbooks in other states typically pay out less than 95% of the handle, so the fixed payout cap in Tennessee should be unnecessary. The argument behind it is to prevent one sportsbook from monopolizing the market and potentially maximize revenue to the state, according to the TEL.

Tennessee will have a 20% tax rate on sports betting revenues.

The TEL still is mulling over what it would do to a sportsbook if it somehow didn’t comply with the 95% cap over a three-year aggregate.

Next steps in process

The TEL Board of Directors was scheduled to meet Wednesday with Lt. Governor Randy McNally, who expressed concerns about some of the regulations and how they squared with what was authorized under the Sports Gaming Act. McNally zeroed in on some of the licensing requirements and fees for non-sportsbook companies involved with the industry. The TEL revised the proposed rules after the feedback.

The meeting with McNally is expected to determine whether the TEL can move forward with promulgating the latest draft of the regulations. McNally previously sent a letter asking the TEL to delay finalizing regulations. He didn’t give a time frame.

Also on the table in Nashville is legislation that would shift some regulatory control over to the Council and a bill that would require the TEL to comply with certain diversity requirements when contracting with third party companies under the sports betting law.

The bill changing regulatory control was set to have a hearing Tuesday, but it was tabled until next week. The other proposal cleared a subcommittee Tuesday. The TEL plans to continue on its path toward finalizing the rules and tweaking them later depending on what the legislature does with both bills.

In other words, the bills on the table related to the 2019 Sports Gaming Act shouldn’t slow the process of getting the first sportsbooks online. The TEL also said Tuesday that certain applications should soon be available on its website. Previously, the TEL posted a form for companies to request an application.