The Tennessee Sports Wagering Advisory Council (SWAC) met Tuesday, and while rule-making was on the agenda, no recommendations were brought to the SWAC.
The SWAC will take over for the lottery as the state’s sports betting regulator on Jan. 1. The group needs to approve a set of emergency rules, which last 180 days, prior to beginning as the regulator. It’s expected that recommended rules will be brought in front of the SWAC at a December meeting.
Perhaps the most important, or at least the most controversial, rule the SWAC needs to decide on is the state’s 10% hold. Implemented by the Tennessee Education Lottery Corp. (TELC), the rule makes requires operators to come out at least 10% ahead in revenue from settled wagers.
Stakeholders recently took aim at the rule in a public comment period, sharing an assertion that the rule intended to make the state more revenue actually does the opposite and harms consumers.
Will the 10% hold remain?
Tom Lee, the chair of the SWAC’s Rulemaking Committee, told the SWAC on Tuesday that he didn’t have anything for action. The Rulemaking Committee wants more time to sort through public comments before bringing recommendations to the SWAC in December.
The Rulemaking Committee met on Nov. 5 and discussed potential emergency rules for about 90 minutes. The 10% hold was a conversation point, although the three-member committee seemed frustrated that public commenters suggested eliminating the 10% hold altogether.
“I frankly wish we had heard more about the ways in which to make the rule work,” Lee said during that meeting.
TENNESSEE: Today we submitted comments urging the new regulator to remove the 10% hold requirement. This onerous provision has no purpose in maintaining the integrity of sports betting or protecting the public interest. It needs to go.
— iDEA Growth (@iDEA_Growth) October 19, 2021
Lee and others had hoped some comments would involve proposed rules regarding the frequency of revenue reporting. Currently, operators report annually, while draft rules suggested a quarterly revenue report. A more frequent report would offer more opportunities for the regulator to impose a $25,000 fine on those that fall short of the 10% hold requirement.
“I think part of our concern when we changed it to quarterly was the fact that it appears through where we were at the time of maybe the August meeting, maybe the one prior, there was no one even close to being able to be in compliance, and we’re really limited in our response to that,” Kandace Stewart, a member of the Rulemaking Committee, said Nov. 5.
TENNESSEE: Looking at the draft (new) regulations, they appear to be doubling down on the 10% hold requirement. Still in there + they are now seeking quarterly accounting, rather than annual. Geez!
— John A Pappas (@yanni_dc) September 29, 2021
While the Rulemaking Committee members did little to suggest they’re seriously considering removing the 10% hold, Lee and others on the SWAC stress that gaming is new to Tennessee and they’re open to listening to experts. The state implemented legal mobile sports betting on Nov. 1, 2020.
“I think it’s important as we go forward in this part of our work to remember that Tennessee is largely a non-gaming culture,” Lee said Tuesday. “We are one of a very few states that, until just a year ago, had no wagering of any kind whatsoever, unless you count the lottery. We’re going to proceed before we come back to you all in a distinctly, I hope, Tennessee way. We want to be careful about these rules. We want to be cautious about these rules.”
Lee went on to say he wants the rules to inspire trust and confidence, but operators recently argued that the 10% hold does the opposite. One Caesars representative called the hold “profoundly anti-consumer” during the public comment period.
The hold figures to be a discussion point at the next meeting of the Rulemaking Committee.
SWAC hires three staff members
Stephanie Maxwell, Keith Boring, and Roger Guillemette will all join the SWAC team, it was announced Tuesday. Maxwell will serve as general counsel, Boring will be the deputy director of administration/chief of staff, and Guillemette will be the deputy director of gaming, licensure, and compliance.
Maxwell has a past connection to SWAC Executive Director Mary Beth Thomas, as the two overlapped during their times at the Waller Lansden Dortch & Davis law firm. Maxwell comes to the SWAC from the Tennessee Comptroller of the Treasury, where she worked as general counsel.
Boring joins the SWAC after most recently serving as the director of legislation at the Tennessee Department of Finance and Administration. He also has a connection to Thomas, as he was the deputy chief of staff at the Tennessee Secretary of State’s office when Thomas started working there as general counsel.
Guillemette, while not from Tennessee, is familiar with the SWAC. He was one of the final three candidates who interviewed for the executive director position. Thomas earned that title, but she reached out to Guillemette after the process and gauged his interest in still joining the team. He most recently served as the Rhode Island lottery director of sports betting and casino compliance.
In addition to adding a few staff members, Thomas and company will begin working out of the Davy Crockett Building in Nashville on Nov. 15.
Thomas emphasized that since she started on Nov. 1, she’s prioritized certain things, with office space and hiring a few staff members at the top of her list. Over the next week or two, she expects the emergency rules to have her full attention.
“That is my sole focus, is getting these rules up to speed so that we can move forward on a fast basis,” Thomas said.