Tennessee Sports Betting Will Finally Arrive During NFL Season

Posted on August 18, 2020 - Last Updated on August 19, 2020

What must feel like one of the longest waits for future sports bettors in Tennessee is finally ending: legal sports betting will launch this football season.

That’s according to Tennessee Education Lottery CEO Rebecca Hargrove, who said Tuesday that TN sports betting will begin by Nov. 1 at the latest. The board is still waiting on criminal background checks for the four operators that have applied, which should be in next month.

The launch is overdue at this point. Gov. Bill Lee let a sports betting bill become law without his signature in May 2019. In the 16 months since then Colorado, Illinois, Iowa, Michigan, Montana and New Hampshire all legalized and began sports betting.

But sports betting in Tennessee won’t look like any of those other states, at least not at first.

Tennessee sports betting market an outlier

Sports betting in Tennessee will likely feel like an experiment for the first year-plus of operations.

For starters, Tennessee is the only US sports betting state with an online-only format. It also doesn’t limit the number of operators, which means any operator with $750,000 a year can apply to land a license.

That means there should be some solid competition in the market with operators fighting to give bettors the best experience. Except that’s not entirely true.

There are a few negatives in the bill, like a 20% tax rate and the required use of official league data. And then, of course, there’s the mandatory hold.

Tennessee requires 10% sports betting hold

Tennessee’s regulators capped the annual payout percentage of each sports betting operator at 90%. That means the state requires a minimum hold of 10% from every sports betting operator. At least the mandatory hold is down from the original 15% proposed.

It won’t be easy to hit that 10% threshold. According to the LSR sports betting revenue tracker, only Delaware and Mississippi have more than a 10% payout rate since June 2018. Delaware’s hold at 13.9% is particularly skewed because of the parlay cards it sells at lottery retailers.

The states with more than a billion dollars in sports betting handle since June 2018 – Nevada, New Jersey, Pennsylvania and Indiana – range from 6.1% to 8.2% holds.

And those books that don’t keep 10%? They could be looking at fees and license suspensions, as discussed in Tuesday’s Sports Wagering Advisory Council meeting.

Mandatory hold will hurt the market

There’s no question that forcing a 10% hold on sportsbooks will limit the Tennessee market.

Sportsbooks could be forced to juice sides beyond the standard -110 or inflate moneylines to protect the minimum hold. That could push bettors in the state to offshore operators that can offer better prices as they aren’t burdened by such hold requirements.

Gambling consultancy Eilers & Krejcik offered other negatives in a January report when the hold was still expected to be 15%:

  • Fewer operators will be interested in the market.
  • Lower per-customer spending and, in turn, player values.
  • A slower overall growth rate for the market.

At the time, Eilers estimated Tennessee could cost itself $11 million because of the hold rule.

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Matthew Waters

Matthew Waters is a reporter covering legal sports betting and the gambling industry. Previous stops include Fantini Research and various freelance jobs covering professional and amateur sports in Delaware and the Philadelphia area.

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