Tennessee Could Adjust Rules To Address Sportsbook Industry Stalling Withdrawals

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Regulated sportbooks are supposed to be superior to offshore, unregulated ones, especially in terms of consumer protections. But one business practice in New Jersey, the nation’s top sports betting market in terms of money wagered, has raised eyebrows, to say the least.

At some of the sportsbooks in the Garden State, an undisclosed number of customers have complained about the platforms intentionally delaying the withdrawal process and incentivizing bettors, sometimes with bonuses, to keep playing rather than cash out part of or all of their money. Stalling withdrawals is far from a new tactic from the online gambling industry at large, whether regulated or unregulated. Now that sportsbooks are increasingly mainstream and gambling apps are under greater scrutiny than ever before in the U.S., this little-known practice is making some people very angry.

The Press of Atlantic City recently penned an op-ed blasting the practice as “despicable” and one that could lead people down the path of problem gambling. The newspaper urged New Jersey regulators to take the matter more seriously. So far, New Jersey regulators have threatened small fines.

At a recent Tennessee Education Lottery board meeting, regulators for the Volunteer State’s sports betting industry briefly talked about the issue and plan to probe the matter more thoroughly at a follow-up meeting.

Currently, books in Tennessee must process patron withdrawals in a “reasonable time frame,” according to the sports betting regulations. Here’s a look at the full provision in the regulations: “A player’s request for withdrawal of funds (i.e., deposited and cleared funds and funds won) shall be completed within a reasonable timeframe unless there is a pending unresolved Player dispute or investigation prompted by a Player dispute or the TEL. Funds for withdrawal may be withheld from withdrawal until the funding transaction clears or the chargeback period ends.”

Lottery so far unsure what to do

“My guess is that practice is not unlawful,” TEL Chairwoman Susan Lanigan said at the Jan. 29 meeting. “It sounds like the business practice probably [is] to some degree engaged in. I don’t know, staff can take a look at that and look at other jurisdictions … and if we think we need to we can consider [amending] our rules.”

TEL CEO Rebecca Hargrove said a “report” on the issue should be discussed later this month.

The TEL added that it hasn’t received any formal patron complaints regarding withdrawals. Tennessee launched online-only sports betting on Nov. 1, 2020.

Three of Tennessee’s four active sports betting operators also operate in New Jersey. More brands that are live in New Jersey are expected to launch this year in Tennessee. No individual bookmaker has been singled out with regard to this questionable conduct, as it’s an industry-wide issue.

The issue could be especially pertinent for Tennessee, which was the first state in the nation to mandate that sportsbooks hold at least 10% of their handle in the form of revenue over a 12-month period. It appears sportbooks will be fined if they violate that regulation, which was relatively controversial to the industry when it was first pitched by regulators. It’s unclear what exactly sportsbooks in Tennessee will do differently to hit that 10% minimum hold, when in other states the hold is a few percentage points lower.

Stretching the meaning of “reasonable time frame” to encourage customers to keep betting could be one method books would use to hit that high hold. So far, it seems bettors in the nascent Tennessee market aren’t complaining about the cashing out process.

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