Tennessee Sports Betting Market Positioned for Payoff

Tennessee Sports Betting Market Positioned for Payoff

Broadway was jammed with them, from the stage down by the Cumberland River, up the hill toward 4th Avenue where more hung over railings of multi-decked sports bars and country saloons. They were swathed in National Football League jerseys representing seemingly every team and every corner of the country, here where the South sidles up against the Midwest.

They were 20-somethings to 50-somethings and they were overwhelmingly male, except for the occasional group of females annoyed and assessing what had unexpectedly mired their bachelorette parties.

They were the epitome of the demographic that currently constitutes the American sports fan and sports bettor. And they were convened in Nashville for the NFL Draft on April 25. If they had been in Nevada – where the draft will be held next April – they could have wagered on upcoming draft picks on their phones.

But even just two weeks ago, the prospect of being able to do so in gambling-averse Tennessee, one of just seven states without even a casino presence, was remote.

Tennessee's Path to Legalization Upends Expectations

Then the Tennessee legislature, unencumbered by the interests of divergent interests of tribal, casino gaming companies and horse racing tracks, changed the game in its state, and, perhaps, everywhere.



Within weeks of the last draft signage being pulled down and the thump of county rock again holding sway in Nashville’s party district, the so-called "Tennessee Model" of an all-mobile sports betting market was positioned to become the standard for the second phase of the growth of legal sports betting in the United States, nearly one year after the repeal of the Professional and Amateur Sports Protection Act by the Supreme Court.

The future had seemingly come to the right place.

“Some people refer to it as NashVegas,” Dr. Cody T. Havard, associate professor of Sport Commerce at the University of Memphis' Kemmons Wilson School of Hospitality & Resort Management, told Gambling.com. “I do think there's a big market if people around the state are going to be able to do this.”

Locale Plus Rabid Fans Equals NashVegas

Tennessee provides the type of laboratory that none of the eight states currently with legalized sports betting underway can provide regarding the industry's next evolution. There’s its heartland geography, population and collection of professional and college sports teams. That Tennessee will be the first without actual physical sportsbooks further hones the experiment.

Many states that currently offer legal sports betting offer some similar elements, but Tennessee is unique.

With franchises in the NBA (Memphis Grizzlies), NFL (Tennessee Titans) and NHL (Nashville Predators), Tennessee hosts more professional teams than any state with legal sports betting other than Pennsylvania. And though Pennsylvania has elite-level college programs in Penn State football and Villanova basketball, Tennessee’s centrality to – and quasi-sports betting monopoly over - the manic Southeastern Conference market represents a massive opportunity.

Considering its tourism industry and that it is home to the University of Tennessee and Vanderbilt, Nashville could become the unofficial legal sports betting destination of American’s most fervent conference fanbase. Tennessee could begin sopping up tax revenue in time for football season if the law goes into effect in the time frame expected

How Tennessee Compares to Other States

The New York Giants play their NFL games in New Jersey, but betting on local college teams is forbidden there, a restriction not in the Tennessee law. The Vegas Golden Knights are currently Nevada’s only major professional sports franchise but the Oakland Raiders will move to a stadium near the Las Vegas strip next year.

Pennsylvania has more professional teams than Tennessee with the Eagles (NFL), Flyers (NHL), 76ers (NBA) and Phillies (MLB) in Philadelphia and the Steelers (NFL), Penguins (NHL) and Pirates (MLB) in Pittsburgh. And The Keystone State will soon offer mobile betting.

Tennessee still has an advantage.

“Sports in the state is taken very seriously as it is most places. But you also have places like Nashville, places like Memphis that have the professional team and they also have the states surrounding Tennessee that are starting to make a lot of money off of the product in Tennessee,” Havard said. “If (legal sports betting) were to happen in Tennessee, I would think that would be a very big thing for the state and for finances.

“I also think from a fan's perspective, or I should say from a consumer's perspective, you would have what you would call 'die-hard fans' that are going to follow a team regardless. But you also have those kind of general fans and then even more so people who may not be as interested in a sport product, but they're interested in kind of the eustress they can get from gambling. And I think that would attract people to the area as well as, I think it would be very, very big for a state, in both financial terms and kind of cultural or to a sport fan from a sport fan's perspective.”

Geographic Advantages for Tennessee Sports Wagering

Sports betting is legal and underway in Mississippi – also home of two SEC member institutions - but mobile betting is allowed only within the confines of state casino sportsbooks.



With two cities among the top 25 in U.S. population – Memphis (656,000) and Nashville (655,000) - plus Knoxville (187,000) and Chattanooga (179,000), Tennessee is also just 110 miles from Atlanta's 5.8 million in metropolitan area population. Chattanooga is positioned particularly well along Interstate 75 to lure Georgia bettors.

Along an incorrect imaginary line that has been the demarcation zone of a water dispute, 19th-century cartography and 21st-century geofencing will meet in the community of Lookout Mountain. Residents on the Georgia side of the upper-middle class town will be able to stroll Lula Lake Road into Tennessee – a stockade fence separates two neighbors’ properties and the state borders there – and place legal bets.

Eight bordering states – Mississippi is the lone jurisdiction where sports betting is currently legal and ongoing – represent 48.9 million in population. Arkansas has legalized the practice without an online or mobile component and sports books have yet to open across the Mississippi River from Tennessee in West Memphis. Missouri, Kentucky and North Carolina legislators have discussed legal sports betting since the repeal of the Professional and Amateur Sports Protection Act last May.

With 6.8 million residents, Tennessee is double the population of Nevada and just two million less than New Jersey, the undisputed leader in the legal sports betting market with roughly $2.3 billion in handle since June.

Daniel Kustelski, CEO of Nashville-based daily fantasy and sportsbetting platform-builder Chalkline Sports, said the Tennessee mobile-only approach "feels progressive." In an email to Gambling.com, Kustelski said the impact on surrounding states and "the South in general will be intense," likely prodding them to legalize sports betting.

"The sports and types of bets that Tennesseans will bet on will look a bit different than what happens in Nevada and New Jersey," he said. "It will add flavor to the national landscape of betting personas."

Northeast vs. Tennessee Sports Wagering Markets

Granted, New Jersey is nestled against New York state’s 19.9 million residents and Pennsylvania’s 12.9 million – including the cities of New York (8.5 million) and Philadelphia (1.6 million), respectively, directly across rivers – but geo-fencing technology prevents them from wagering on its sites beyond its borders.

New York has legalized sports betting in a limited rollout to upstate casinos, and without mobile. The District of Columbia is slated to implement sports betting in sports venues and via mobile this year.

States with larger populations that legalize sports betting with mobile wagering will likely overtake Tennessee. But its status as a tourist destination will give Tennessee some of the same advantages that Nevada (population: 3 million) enjoys as the current most prolific wagering state and New York (19.5 million) could with a full mobile offering.

An estimated $3 million is bet illegally on sports yearly in Tennessee.

An Eilers & Krejcik report predicted that FanDuel and DraftKings would replicate their dominance from New Jersey by eventually accounting for upwards of 80 percent of a possible $229 million yearly market in Tennessee. DraftKings would not comment on the Tennessee market until the bill becomes law.

Where Tennessee Bettors Might Come From

That’s not to suggest that the cut-off-jeans-clad bachelorette party-goers from Texas riding on flatbed trucks will be tapping out parlays as Old Town Road deafens the pedestrians on Broadway. That’s demographically unlikely.

But the would-be captains in the Volunteer Navy on the Tennessee River behind Neyland Stadium could. And so could the cross-country traveler in the passenger seat headed toward Chicago on Interstate 24, leaving tax revenue behind at 75 mph as they cross into Kentucky.

With HB1 specifically prohibiting physical sportsbooks, the Tennessee betting parlor will be the living room, second deck at Acme Seed and Feed or a corner table at Gus’s World Famous Fried Chicken. Or it could be a chain restaurant or bar offering the communal experience of cheering and betting with or against other fans, all without having to purchase gaming licenses.

Buffalo Wild Wings, with 1,200 locations – eight in Tennessee, including one in Tullahoma tucked 33 miles north of the Alabama line – said through a spokesperson in an August release it was “uniquely positioned to leverage sports gaming to enhance the restaurant experience for our guests.”

Is ‘Tennessee Model’ New Template for America?

New Jersey has been at the vanguard of the legalized sports betting movement since 2011, when politicians, lawyers and horsemen began a legal fight that culminated in the repeal of PASPA. The case the Supreme Court heard that led to the overturn was first launched by then-New Jersey Gov. Chris Christie and taken up by his successor, Gov. Phil Murphy.

That state’s rapid but ordered implementation because of years of preparation created a market in which numerous companies vied for share in what was quickly proved to be a bountiful market. New Jersey’s framework, therefore, has been often referred to and in some cases copied to some extent.

But Tennessee’s bewilderingly rapid navigation of a complicated political and social landscape in the conservative state could illuminate a new path.

A press secretary told The Tennessean that Gov. Bill Lee "does not believe that the expansion of gambling is best, but he recognizes that many in the legislature found this to be an issue they want to explore further” and would allow it to become law without his signature.

Cal Spears, CEO of Nashville-based RotoGrinders, said he was "shocked we got there so quickly" in regards to settling on legislation.

"We have no casinos and some proponents of this bill voiced strong opposition to land-based casinos while lobbying for HB1," he told Gambling.com in an email. "Mobile-only through the lottery was our only viable path to sportsbetting. Local bookies are common now, but I think consumers will quickly switch over to regulated books as the diversity of offerings becomes apparent through advertising."

While politics and values will remain local issues, and though the 20-percent tax rate and $750,000 annual license fee in the bill are higher than the national trend, Tennessee legislators have established the framework for a mobile-only rollout in a rare state with no casinos that Eilers and Krejcik claim could generated $229 million in annual revenue for gaming companies.

With nearly 80 percent of the New Jersey handle coming online and mobile phones an increasingly intrinsic facet of modern existence, the Tennessee bill has the look of a streamlined package for regulars, purveyors and customers.

And many of the major players that entered the New Jersey fray figure to come seeking new business. All of those potential providers asked about interest in Tennessee declined comment to Gambling.com until after a bill becomes law.

Market Potential in Tennessee Draws Interest

Havard said the attraction of gambling as a device of tourism became apparent earlier this year when Kustelski traveled from his home in Kentucky to speak at a Kemmons research forum.



After an evening dinner in Memphis with Havard, the former sportsbook operator pardoned himself for a two-hour round-trip jaunt into rural Mississippi to peruse the casino and legal sports betting options.

"The next day during the talk, he's telling the students, ‘Hey, I went down to Tunica and I was able to take the bet on this and this and this,’ and ‘these are the different types, so these are some of the things that you could expect,' " Havard recalled. “He is a professional who works running a book, he's ran a book in South Africa, he's a professional who is not just looking at kind of the gambling aspect of it. He's looking at the business aspect of it and everything as well.

“But here's someone who instead of going to their room, they spend two hours to drive south and drive back. And it was very indicative to me of what could happen if (sports betting) were to be legalized, and especially if it's mobile or with mobile access and people don't really have to go to the brick-and-mortar casinos anymore.”

Soon, they can just go to Tennessee.

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