Tennessee Sportsbooks Want Mandatory Hold Rule To End

Posted on October 7, 2021
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Written By on October 7, 2021

There was one central topic on the minds of Tennessee sportsbooks at Tuesday’s hearing on proposed rule changes: mandatory hold.

The Sports Wagering Advisory Committee proposed a few changes because it has to promulgate its own rules as part of the process to take over as regulator. One of those proposed changes includes reviewing the mandatory 10% hold on a quarterly basis instead of annually.

Four online TN sportsbooks offered their thoughts on the proposed rule changes at the SWAC’s meeting:

Penn: Legislature did not mandate hold for Tennessee sportsbooks

Barstool Sportsbook only launched last month, but Penn had plenty to say about a few rules.

Penn wants to help maximize tax revenue in Tennessee, but a mandatory hold is not the best way to do that, Penn Interactive Director of Sportsbook Operations Josh Pearl said.

The mandate was also not the legislative intent in the enabling legislation, he added. The legislature could have added it in this year’s bill that made the SWAC the regulator if so.

The hold also leaves a “lasting, negative impact” on the TN sportsbook market, Pearl said:

“Penn’s biggest concern with the currently mandated 10% annual hold and proposed quarterly review is that this mandate forces operators to make undesirable business decisions leading to consumer unfairness. The best chance an operator has to meet the 10% hold mandate is to increase the vigorish, also known as the vig, or decrease the payout on parlays and teasers and other wagers offered.”

Caesars Sportsbook: capped payouts ‘profoundly anti-consumer’

Dean Hestermann, director of issues management and strategic communications at Caesars, said Tennessee has a chance to decide how consumer-friendly its sports betting market should be.

Caesars believes it is “profoundly anti-consumer” with the current mandate, Hestermann said:

“Over time and absent the rule governing capped payouts, we would expect the Tennessee market to grow while simultaneously the Tennessee hold percentage would more and more resemble Nevada’s. That would be the result of smart consumers making smart bets on engaging products in a robust, competitive marketplace with no official government policy that encourages us, the operators, to offer consumers worse bets with worse odds.”

Hestman called out the DC sports betting market where Caesars dominates GambetDC in market share. He said there is “no question” GambetDC’s comparatively high hold percentage is a big reason for that. Hestermann noted the DC Auditor’s report called for improved odds, which would lead to increased bets.

BetMGM focused on ‘race to the top’

Ricardo Lomardo, VP of government affairs at MGM Resorts, pulled out the old-faithful line of how regulated books are at a significant disadvantage to those offshore operators that pay no taxes.

Lomardo said all operators are in a “race to the top” and that removing the mandate will actually help consumers:

“Rather than setting an artificial floor, Tennessee should grant operators the flexibility to set attractive odds based upon the market and competitive landscape.”

Lomardo also mentioned how operators might have to limit certain offerings because of the mandated hold. The SWAC pressed him for examples of this instead of hypotheticals.

DraftKings concerned about compliance

Kevin Cochran, senior manager of government affairs at DraftKings, made his employer’s stance pretty clear: DraftKings wants to be in compliance. Councilmember Tom Lee asked Cochran to explain how a quarterly assessment is harder than an annual assessment from a compliance standpoint:

“I think the reason we might not want to see that is solely because we could potentially then have to be found in non-compliance with the rule. And we’d have to report that rule to all the other regulators that we operate under. So we take compliance very seriously.

“… It’s definitely a reputational risk, there’s a suitability risk. And for future licensing we are never trying to get fined. Never.”

Cochran also brought up how Rhode Island had a negative 4.3% hold when the New England Patriots beat the Los Angeles Rams in the 2019 Super Bowl. That could easily happen in Tennessee if the Titans won a Super Bowl as well, which could lead all operators to be out of compliance.

That could happen with any event even without the mandated hold, one SWAC member pointed out. Cochran agreed but noted without the mandate there would be no penalty against the sportsbooks.

Friends are fine with Tennessee sportsbooks payouts

Who knows why the SWAC even held this meeting? Councilmember Hanes Torbett could have saved everyone a lot of time by asking his friends what the council should do:

“I just texted four buddies to ask if they have any problems with the payout in Tenneseee. Because I have a feeling we have seven people that are going to present and they’re all going to say the same thing. All four of them said no, they have no problems with the payout.”

Issue settled then – thanks, friends. To his credit, Torbett at least did ask for proof of claims that removing the mandate would raise tax revenues.

Penn addresses advertising and RG

Marketing Compliance Specialist Alexander Graham also had a few things to say about advertising and responsible gambling rules.

Operators ability to offer promos around high-interest events that happen quickly is hindered by Tennessee’s requirements, he said. Sportsbooks must submit promo material 10 days in advance.

Graham also asked for simplified responsible gambling messaging, as the American Gaming Association recommended in an August memo. Multiple members of the SWAC mentioned they had not seen the memo.

PointsBet plans on joining Tennessee sportsbooks

PointsBet Senior VP of Customer & Insights Ron Shell gave a general presentation on sports betting to the SWAC at the meeting.

He also mentioned that PointsBet is currently going through the application process to launch in Tennessee.

There are four new operator applications, five supplier applications, and approximately 13 vendor applications awaiting action.

Executive director hiring process wrapping up

The SWAC is still without an executive director, though that should change soon.

Public interviews with the three unannounced finalists will be held either Oct. 14 or Oct. 19.

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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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