A Tennessee House subcommittee tabled legislation on Tuesday afternoon that could strip the Tennessee Education Lottery Corporation of certain rulemaking responsibilities.
Down the road, miles apart in Nashville, a meeting of the Tennessee Education Lottery Corporation Sports Wagering Advisory Council saw robust discussion of a controversial draft rule stipulating that licensed TN sportsbooks shall not pay out to patrons more than 85% of total dollars wagered.
The 27 items on the Departments & Agencies Subcommittee agenda at Tuesday’s hearing included a bill relating to the duties of the state’s nine-member Sports Wagering Advisory Council (SWAC). The bill, HB 2844, introduces a series of amendments that would shift the onus of regulating sports betting in Tennessee from the Tennessee Education Lottery Corporation’s (TELC) board of directors to the advisory council.
Effectively, HB 2844 would flip the roles of the TELC and the Sports Wagering Advisory Council, which is comprised of individuals appointed by several state officials, including the governor. The SWAC would be tasked with regulation and managing compliance with the Tennessee Sports Gaming Act of 2019, while the TELC would take on the role of advisor, ceding ultimate say to the SWAC.
Discussion of ‘payout cap’ ongoing
At the meeting in the Tennessee Education Lottery Corporation board room on Tuesday, the advisory council recommended amending a clause that would require licensed operators to keep a minimum of 85% of all wagers placed. Under a proposal floated by members of the advisory body, it appears the state will increase the fixed payout cap to 95%.
Not set in stone, but it appears TN will actually go with a 95% fixed payout cap, not 92%.
Room was basically in consensus that 92% was too low.
— Brian Pempus (@brianpempus) March 10, 2020
The subcommittee adjourned the hearing without considering HB 2844 and several other proposed bills. The measures not heard Tuesday will be rolled over to a meeting scheduled for next week, said Rep. Bob Ramsey (R – Maryville), chairman of the subcommittee.
A hotly disputed cap
Last month, the TELC board signaled its intention to increase the cap from an initial proposal of 85% amid heavy criticism from a bevy of stakeholders. A threshold of 92% was discussed at a previous meeting. The cap is not part of the law passed last spring by Tennessee’s legislature and was added during the regulatory process.
When the Lottery released abbreviated public comments in response to its proposed bill rules in January, TELC received more than three dozen comments related to the proposed capped payout. One stakeholder described a proposed 85% cap as “crippling” to its bottom line, while another described it as a mechanism that would “limit market growth.”
An 85% cap on the payout of an operator’s winnings translates to a hold percentage of 15%. Historically, Las Vegas books hold much less than 8%, said Robert Walker, director of sportsbook operations for US Bookmaking. Over a 35-year period through 2019, Nevada sportsbooks reported an annual hold percentage above 7% just once, according to statistics compiled by UNLV’s Center For Gaming Research.
Ahead of the subcommittee hearing, Tennessee Senate Speaker Randy McNally, the state’s Lieutenant Governor and Senate and House Speaker Cameron Sexton penned a letter to TELC chair Susan Lanigan, stating that certain regulations drafted by the Lottery may be outside of the scope of the sports gambling bill passed in 2019. The regulations pertain to Sports Pool Intermediary and Vendor licensing, as well as stipulations on associated fees.
The fixed payout cap prevents a single sportsbook operator from monopolizing the Tennessee market, TELC officials said. Detractors claim that a hold mandate will encourage books to offer a higher volume of risky exotic wagers such as parlays, rather than straight win bets.
“No other state has this,” said Councilman Hanes Torbett, an owner of a commercial insurance company in Washington County. “If there’s no mandate on hold, I’m going to put all my products out there.”
Minority business involvement
The subcommittee passed a separate bill that requires TELC and its board to comply with certain diversity requirements when contracting with third parties to enforce the Tennessee Sports Gaming Act. The bill, HB 2604, is sponsored by Rep. Barbara Cooper (D – Memphis).
TELC and the advisory council will delay the finalization of rules pending the status of HB 2844, Lanigan said. Lottery officials could shed further light on when the regulations could be promulgated following a TELC meeting with McNally on Wednesday.
Following Tuesday’s developments, Lottery officials still expect that legal sports wagers will go live in Tennessee by the start of the football season.