Tennessee Sports Betting Impresses With First-Week Numbers

Tennessee sports betting operators got off to a strong start, according to Tennessee Education Lottery President and CEO Rebecca Hargrove, who shared Monday that four operators took in $27 million in handle through the first eight days of legal sports betting. On the first day, Nov. 1, which was the an NFL Sunday, operators took in $5.1 million, and Hargrove noted one operator, BetMGM, said the launch “outstripped all other states on the fortnight by 200%.”

Hargrove released those numbers during Monday’s Tennessee Education Lottery Sports Wagering Advisory Council meeting. The TEL Board of Directors is set to meet Tuesday for the first time since the launch.

Because Tennessee has a 90% “payout cap,” which means operators must hold at least 10% of wagers, the state took in $509,000 in tax revenue during the opening week. The tax rate is 20%. Here’s a snapshot of the total numbers for the four live operators: BetMGM, DraftKings, FanDuel and Tennessee Action 24/7:

Nov. 1

  • Handle: $5.1 million
  • Payout to customers: $3.4 million
  • Gross gaming revenue: $800,000
  • Tax revenue: $160,000

Nov. 1-8

  • Handle: $27 million
  • Payout to customers: $23.9 million
  • Gross gaming revenue: $2.5 million
  • Tax revenue: $509,000

Council’s spouses banned from betting

While Tennessee operators are seeing huge interest, the advisory council had other issues to manage. It voted 8-0 to prohibit spouses of council members from wagering on sports in Tennessee, and it had spirited discussion on how to handle fining operators for violations. According to the new law, council members are banned from wagering.

On the subject of fines, the advisory council didn’t come to any conclusions, but it did take about an hour to bat around how to define what a violation actually is and how to mete out fines. The group decided to reconvene in a special meeting in December to continue the conversation. Some sort of consensus is required for Lottery staff to be able to spell out rules.

According to the law, the Lottery may fine operators $25,000 for violations, but the law does not make clear how often a fine can be imposed for the same violation or if violations can be broken down into categories based on how heinous they are.

As part of the discussion, one council member — the meeting is held by phone conference and all parties are not always easily identifiable — asked, in the event an operator distributed unapproved 10,000 fliers that are in violation of the regulations, “Is that one violation or 10,000?” The council seemed to agree that that situation would merit a single fine, assuming the only violation was that the flier was distributed without Lottery approval.

The list of potential violations is long and varied, but some of the potential violations mentioned were if an operator uses unapproved advertisements/marketing materials, or if key information is left off the materials (i.e. stating that the betting age is 21 or failing to including problem gambling help line information). Operators are required to submit advertising and marketing materials to the TEL for approval.

How to handle fines and the 10% hold?

Another key question is how often an operator could be fined for ignoring the 10% hold rule. There has been some concern among council members and the TEL that operators may see the $25,000 fine as a “slap on the wrist” in exchange for being able to offer more competitive pricing. Because operators are required to hold 10% of handle — the national average is more like 7% — pricing/odds in the state may be worse than in other states, at least on certain markets, possibly driving potential customers either across state lines or onto the black market. At the moment, none of Tennessee’s border states offer statewide mobile sports wagering, but Virginia regulators are planning to go live with operators early next year.

“This comes up most poignantly in the case of the hold, because we’ve had the conversation amongst us in public session about whether or not a $25,000 fine is the cost of doing business,” said attorney Tom Lee, an appointed member of the state’s sports wagering advisory council. “I think that is determined in part by how the violation is defined. If you can only determine the violation once a year, it would have a different impact than if it could be” fined repeatedly.

Due to time constraints of some council members, the hour-plus meeting was suspended before any decision on the fines and violations could be reached.

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