Tennessee Working Toward New Sports Betting Regulatory Structure

The Tennessee legal sports betting industry has experienced some ups and downs since its November 2020 launch. In an attempt to stabilize the regulation side of the platform, the state officially signaled a move away from the current overseer of the platform, the Tennessee Education Lottery, to what legislators hope is a more effective body, the newly formed Sports Wagering Advisory Council.

Gov. Bill Lee signed SB 588 into law Thursday, hoping that it would put an end to the already controversial and in some cases in the US, a failed Lottery-model and give birth to a more traditional body, complete with a director and members with some experience in the legal sports betting space.

The Tennessee Scene

Not all is bad in the Tennessee scene. The Volunteer State was the quickest to a $1 billion lifetime handle before Michigan passed it last month. And its online-only platform (the only one in the nation) is one that could act as a model for states not wanting the burden of a retail sector.

But the Tennessee Education Lottery policies of a mandatory 10% hold, a rather large 20% tax rate and the state's choice to settle on a Lottery Commission to oversee the platform has raised more than a few eyebrows within the broader US legal sports betting scene.

In its relatively short time of operation, the Tennessee Education Lottery has also gained the distinction of becoming the first and only regulatory body having to suspend one of its sportsbooks when improprieties were reported by Action 24/7. The TEL managed to botch that procedure, Action easily won an injunction and were able to carry on as normal with little or no repercussions.

The Role of The Sports Wagering Advisory Council

The nine-member The Sports Wagering Advisory Council will be in charge of overseeing everything to do with the Tennessee legal sports betting industry, from reviewing the rules, coming up with new ones and awarding licences to prospective new operators. Their job will also be to clean up the small mess that the TEL created.

It doesn't sound as though the TEL is too disheartened by losing their role as regulator of the Tennessee sports betting industry either. “We are elated with the legislation as it passed,” TEL CEO Rebecca Hargrove said. “We believe our organization is an operational organization that acts more as an operator than a regulator. So, to have a regulator regulating sports betting is a very positive outcome.”

The SWAC has met already with the aim of hiring a director to run their show. There has been talk of bringing in a firm to do the heavy lifting on that front, one that can hone in on the type of experienced candidate the Council is seeking.

“We’re talking about people who are significantly experienced, they’ve probably got a very good job right now,” said council member Tom Lee. “Maybe someone in a similar position in another state or the maybe the No. 2 in another state. And advancing their name is going to be complicated. So, there’s a part of this process that is helpful from a search firm that will be helpful like this is what you have to bring to the market.”

Timeline

Tennessee lawmakers have given themselves a tight timeline to complete their transition to the SWAC. January 1 has been identified as the official handoff date and there is a ton of work to be done before that time. Essentially, the state hopes to build their regulatory body from the ground up over that time.

Getting a director in place is first-and-foremost for the incoming regulatory body. Hopes are that things will begin to fall in line shortly after that. Present regulations still have to be scrutinized, adapted or changed, new rules have to be considered, applications by prospective providers still have to be looked at, and a few licenses still have to be handed out.

In the End

Tennessee should be credited with seeing holes in their legal sports betting industry and working to plug them. Everybody, from the bettors to the providers and ultimately the state which benefits from tax revenue, benefits from a legal sports betting platform that has everyone on the same page.

Improvement should result with the Tennessee move away from its lottery model. It will be interesting to see if Oregon and Washington DC, which have similar regulatory models, follow suit and change their structure as well.