It took a while, but Tennessee is finally ready to get in on the sports gambling scene. Of course, there’s no rush since virtually all sports activity is on hold because of the coronavirus, but at least all of the pieces of the puzzle are now in place. The final step was for the Tennessee Education Lottery Corporation (TELC), which is overseeing the activity, to sign off on the rules that will govern sportsbooks’ operations, and that happened yesterday. However, one provision in the newly-created policies is not going to sit well with operators, especially as they look to pick up every dollar they can following the massive revenue losses caused by COVID-19.
The rules were initially expected to be implemented this past February, but that was delayed after heated debates started over some of the options. Perhaps thinking that the coronavirus would keep people too busy to notice, the TELC approved a hold cap of 10% on all payouts. In other words, the sportsbooks will only pay out 90% of the actual winnings, keeping the other 10% in reserves.
This isn’t completely different from what is seen in other states; however, those states have holds that are typically much smaller – Nevada has a rate of 6.3% and New Jersey’s rate is 6.9%, and the national average is 7.5%. Only Washington, DC was worse, with a proposed 20% hold. Ultimately, the district’s sports gambling rules were put into effect with no cap included.
The concern is that the hold might lead to gamblers turning to the black market, which is one of the issues legalized sports gambling was designed to resolve. According to Brendan Bussmann of Global Market Advisors, a global gaming advisory firm, “A year ago, many looked to have Tennessee be a model for a mobile-only state and take best practices to craft a market. Based on some of the provisions today and the wait-and-see approach, it is turning into a model of how not to craft an ideal market that maximizes revenue and provides the best opportunities for customers, operators and the state.”
The TELC will let the cap stay in place for a year and then renew how the plan is working. It should be easy for the organization to figure out, especially since it received an abundance of negative feedback over the proposal during a public commenting period. Chances of Tennessee having a robust sports gambling industry are going to be hampered by the move, and Vegas oddsmaker Matt Lindeman summed it up perfectly in a tweet, stating, “Looks like the Tennessee sports betting scene is gonna be about as nationally relevant as their football program.”