With 3 Sportsbooks Approved, Tennessee Could be Next to Join US Sports Betting State List
Make way for the Volunteer State to get on board the sports betting train after delaying the arrival for some time. Late last week, a Tennessee panel conditionally approved licenses for the first three sportsbook operators under Tennessee’s online-only sports betting program, which is expected to allow wagers for an optimistic start beginning November 1st.
Industry leaders FanDuel, BetMGM, and DraftKings Sportsbook drew unanimous approval Wednesday from the Tennessee Lottery’s Sports Wagering Committee. Under state guidelines, there is no limit on the number of sportsbook operators in Tennessee, if they meet requirements.
The panel also approved companies to play various other roles in the state’s sports betting market. More meetings are scheduled for October 5 and October 16 to consider more applications plus review more information from the sportsbook licenses. There is no limit to the number of sportsbook operators in Tennessee provided they meet the states’ requirements. That being the long most controversial issue in that the Tennessee Lottery will control and regulate all sports wagering within the state.
Tennessee lawmakers passed sports wagering by the narrowest margin in early 2019 for people 21 and older who are physically present in the state when placing bets. Republican Governor Bill Lee reluctantly allowed it to become law without his signature, citing concerns over the expansion of gambling in Tennessee, a state without onsite casino gambling. Following up, the law took effect in July 2019 but has followed a twisted path since, leaving many regulatory specifics up to the Tennessee Lottery.
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Back in April, it was reported that Tennessee would cap the amount a bettor could win at 90% of their original stake, becoming the first state to mandate that the books generate at least a 10% hold (profit). As an example, if a book takes in $1,000,000 in bets and makes $100,000 in revenue, its hold percentage would be 10%. Again, in comparison, Nevada has historically maintained a hold rate in the 5-6% range. Nevada and Pennsylvania have struggled to maintain an approximate 6-7%, bolstered by a few good months before the Coronavirus hit. By the end of 2020, it is likely that most states will average around those estimated figures.
Tennessee will also require new operators to a much higher annual licensing fee ($750,000) and tax rate (20%) than other states that have come onboard since PASPA (the Professional and Amateur Sports Protection Act) was overturned in May 2018. Illinois ($20 million for online-only operators) and Pennsylvania ($10 million) have the steepest licensing fees, while New Jersey ($100,000), Indiana ($100,000), and Iowa ($45,000) have opted to go much lower.
The most major concern for sports bettors will be who will pay the price for these high costs. This issue has already drawn controversy in small market Washington DC, where the DC Lottery “Gambet DC” has also been designated to run sports wagering responsibilities.
At issue, is the basic principle of games falling outside the “dimeline”, the anchoring price sports bettors pay for wagering on each game. Simply speaking, the dimeline, is the vigorish or commission a bettor pays for selecting a game. Therefore, a traditional -110 line equates to a 10% commission. It is anticipated in Tennessee (like in DC), most games will fall outside those parameters into a territory of -115 to -120 per game. Holding Tennessee gamblers hostage to paying extra to support the state lottery.
It should come as no coincidence that FanDuel, BetMGM, and DraftKings Sportsbook were the first three licenses approved to quickly begin a business with the state. New signups will help support the large firms growing national brand and recent aggressive national advertising campaign while not covering the national potential of sports bettors. The effect of Covid-19 driving online wagering into an average of 85%+ for sports betting is also a contributing factor welcoming Tennessee into the landscape ASAP.
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Larry Gibbs is both a seasoned journalist and a respected online gaming industry consultant. His wry commentary & sharp analysis have appeared in numerous top gaming and sports wagering publications. He has also served as Vice President of US Gaming Services, a marketing research organization with 15 years of experience in US online wagering. He has spoken at noted gaming industry conferences including G2E, GiGSE, and NCLGS.