Bill To Reverse Tennessee Sports Betting Regulatory Duties Withdrawn From Consideration

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On Thursday, a bill in Tennessee that would have significantly altered the 2019 Sports Gaming Act was “taken off notice” from the House Departments & Agencies Subcommittee calendar.

The legislation, House Bill 2844, was slated for consideration Thursday. It was filed in February.

The bipartisan proposal was sponsored by Rep. Andrew Farmer, a Republican, and Rep. Rick Staples, a Democrat. Both are from the Knoxville area.

Staples was the sponsor of the 2019 Sports Gaming Act, a law that made Tennessee the first in the country to mandate the regulation of sports wagering without any retail shops. In other words, Tennessee will be online/mobile only. The state is currently in the process of considering firms for licensure.

The bill’s removal from Thursday’s calendar means it’s off the table until 2021.

A spokesperson for Staples told TN Bets that the COVID-19 crisis has greatly impacted bills filed this year.

“A lot of bills are getting cut that would have normally played out if we had not adjourned,” the spokesperson said. “A lot of legislation will be brought up next year when we have more normal circumstances. The legislature’s main goal is in regards to the state budget and the COVID-19 response.”

The state is still expected to authorize the launch of online/mobile books later this summer or in early fall.

Purpose behind HB 2844

The 2019 sports betting law created a nine-member Sports Wagering Advisory Council that is underneath the Tennessee Education Lottery (TEL). The council helped (by way of input) the TEL craft the sports betting regulations that were adopted in April.

HB 2844 was designed to give the council authority over the regulation of sports wagering.

The bill would have reversed the duties of the council and the TEL. HB 2844 would have required the council, in consultation with the TEL’s board of directors, to enforce the Sports Gaming Act and supervise compliance with laws relating to the regulation and control of sports betting.

Instead of the TEL promulgating sports betting rules, the council would have had that authority (with the exception of taxation provisions).

Additionally, the council would have been able to call its own meetings, rather than needing the TEL board to call them for the council. HB 2844 would have made the council more autonomous.

The TEL has described the regulation of sports wagering as an arduous undertaking. HB 2844 would have lessened the burden. Tennessee, home to no casinos, decided to regulate sports wagering under the lottery rather than create a new gaming commission.

Why this matters

While the rules were adopted last month, they are expected to be tweaked over time. One major area of concern in the adopted rules pertains to a so-called payout cap of 90%. That percentage means that a sportsbook in Tennessee would have to retain 10% of its annual handle in the form of winnings from bettors. In states without a cap of this nature, books typically win 5-7% of the handle.

It’s not yet clear exactly how books will adjust their products (betting markets) to fulfill the regulatory requirement. It has created some industry uncertainty.

Tennessee has a 20% tax on sports betting revenue.

The payout cap was controversial among the nascent U.S. sports wagering industry, including the Sports Wagering Advisory Council. Its members were reluctant to have any cap whatsoever. The TEL decided to go with a cap, with the intention of looking at removing or raising it down the line.

The TEL said that it would be more challenging to implement a cap once the industry was up and running, compared to removing it later. The reasoning behind the cap was that it would keep the state’s market more competitive and prevent a monopoly, though other sports betting states have not provided evidence of that as a potential outcome.

It’s likely HB 2844 will be considered again.

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Brian Pempus

Brian served as a senior reporter and online content manager for Card Player Magazine for nearly a decade before joining USBets in October 2018. He is currently focused on legal and regulated sports betting and online gaming. He's an avid jiu-jitsu practitioner in his free time.

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