Six months after Tennessee legalized sports betting, some key concerns have arisen around the proposed regulations, according to a report on TNBets.com last week. Tennessee, the first state to legalize online/mobile-only sports betting, released its draft regulations in November, and since then, stakeholders and observers have noted several issues that could make the Volunteer State a dispiriting, noncompetitive sports betting market.
The public-comment period for the proposed regulations was set to close on Dec. 23, but has been extended to Jan. 6, 2020. Though the Tennessee Education Lottery (TEL), tasked with regulatory oversight for legal sports wagering under the enabling law, did not disclose a specific reason for the extension, it seems there is increased interest in weighing in on the draft regulations.
According to the TNBets.com report, chief among the issues with the proposed regulations are a section that appears to require licensed sportsbook(s) to keep a minimum of 15 percent of all wagers — at least double the industry standard — and a section that nullifies a parlay wager if one leg is a push. What’s custom within the industry is that a pushed (or tied) leg would get cancelled from the parlay, but the remainder of the bet would remain intact with odds adjusted accordingly.
Two rules bad for bettors in particular
On balance both of these rules are bad for bettors. A required 15 percent hold translates into a reduced overall payout to customers. And a push on a parlay means that a ticket that had the potential to win elsewhere would be a loser in Tennessee. Both rules seem to be pushing bettors to do exactly what legal regulation is supposed to prevent — bet through illegal channels, where odds and payouts would be more favorable to the consumer.
At the very least, Tennesseans who live near the state’s borders are likely to find more favorable conditions in neighboring legal states like Mississippi and perhaps also sometime in 2020, in Georgia, Kentucky, Missouri and Virginia. Among Tennessee’s eight border states, two have live, legal sports betting in some capacity while lawmakers in four others are expected to seriously consider legalizing in 2020. And addition North Carolina in July legalized on-site sports betting, though on premises only at two tribal casinos.
My state, Tennessee, approves sports betting and then is trying as hard as humanly possible to ruin it before it starts. Nice
— Chris Hollander FNGC (@UndoneRSG) December 22, 2019
Taken together, the two rules in particular, and there are other concerns for prospective licensees in particular, could give operators pause before committing to work in Tennessee. It’s also a fair question to ask if the required 15 percent hold — which suggests that sports betting can have a fixed outcome similar to a lottery game — is designed to either make sports betting more like a lottery game or to encourage only a single sportsbook in the state rather than multiple shops. A plain reading of the language of the law itself (SB 16) seems to contemplate multiple operators and open competition.
It is not without precedent, however, for the intentions of lawmakers to be massaged or modified in the regulatory process. The most similar example is in New Hampshire, where the General Court passed a law that calls for up to five mobile and 10 retail sportsbook operations, but the Lottery selected only one operator. In that situation. Among the 13 sports betting proposals in New Hampshire, DraftKings offered the state a 51 percent of gross gaming revenue only if it is the sole operator. The state agreed and rather than having an open, competitive market, New Hampshire will have only DraftKings Sportsbook for the foreseeable future.
A single-source setup?
Another comparison that seems to point to the TEL leaning toward a single-source situation, or at least a situation that is more lottery style than straight commercial competition is that Washington, D.C., which legalized sports betting regulated and operated by its Lottery. The D.C. Council controversially chose to extend the city’s Lottery contract to vendor Intralot to include sports betting.
The deadline for public comments on Tennessee draft sports betting regulations has been extended from Dec. 23 to Jan. 6, 2020. https://t.co/d7FHYIzgvD https://t.co/OWnZaYglsc pic.twitter.com/TkpuxOiWkx
— Sports Handle (@sports_handle) December 20, 2019
Stakeholders are clearly concerned about the direction things are moving in Tennessee. According to TNBets.com, several stakeholders seemed perplexed about why any state would choose to handcuff operators.
“I don’t understand why the Commission would restrain a licensee from awarding patrons an amount that falls well short of the norm, and what other states like nearby Mississippi are allowing,” one industry source said. “How does a licensee even go about engineering its book to ensure that bettors as a whole get paid less to meet that?”