How Tennessee Sports Betting Minimum-Hold Rule Could Stop Market Before It Starts

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Tennessee sports betting

Legal Tennessee sports betting will begin when sports resume being played in the country. But bettors likely will find wagering in the Volunteer State less profitable than in other US jurisdictions.

The Tennessee Education Lottery Corporation board of directors unanimously approved final rules, regulations and processes for Tennessee sports betting on Wednesday.

Tennessee is capping payouts at 90% with a 10% minimum hold rule, potentially setting up an unattractive market for sports bettors. Officials said the full rules would be posted by Friday.

No other state requires a minimum hold for sports betting.

Evolution of minimum hold for TN sports betting

The initial Tennessee rules released last November proposed that “Sports Gaming Operator’s aggregate annual payout shall not exceed 85%.”

After receiving backlash from stakeholders during the comment period, the board lowered the hold to 8% in March. Despite the objections, the final Tennessee sports betting rules bump the figure up to double digits.

US sports betting revenue data shows that the average natural hold for legal sports betting since the overturn of PASPA is 6.8%. The historical hold in Nevada is 5.4%.

Only two states — Delaware and Mississippi — exceed a 10% hold.

The board stipulated that Tennessee may revisit the rules in one year.

How payout cap could impact TN sports betting

A study released by gaming analyst Eilers & Krejcik in January projected that the original 15% hold could cost Tennessee $11 million in annual state tax revenue and decrease the number of operators that apply for a license by more than half.

The biggest concern for sports bettors is how a hold will affect operators’ ability to offer competitive pricing. A 10% hold sets up the possibility that Tennesseans feel better off wagering in other states or illegal markets.

In general, the study indicated that a minimum hold requirement results in substandard odds and that sportsbooks may have to further worsen odds on local teams to help balance risk. Additionally, sportsbooks will have to avoid large payout liabilities to stay within the hold requirement.

Internationally, the study showed how France, the only major market with a minimum hold for sports betting, has severely underperformed.

Capping payouts is the standard in the world of lotteries. If Tennessee sports betting flounders, it could illustrate the potential disadvantage for states choosing the lottery to regulate sports wagering.