Tennessee Sports Betting Regulations Set With 90% Hold Cap
The Tennessee Education Lottery Corporation approved sports betting rules on Wednesday, setting an extremely high hold cap at 90%. The move lets the state proceed with its all-mobile betting market, but comes with a steep price.
The board unanimously approved the state regulations during a meeting held via conference call. One of the main issues in the initial draft regulations posted last fall was the payout percentage on sports bets — 85%. Controversy erupted when initial draft regulations were released by Tennessee in November and they included the 85% figure.
RELATED: More on Tennessee sports betting
The cap was set on Wednesday at 90% for one year, still high for U.S. sports betting. That means a hold of 10% when the national hold average is about 7.5%, according to the study of Tennessee’s proposed cap by industry analysts Eilers & Krejcik Gaming. For example, Nevada’s is about 6.3% and New Jersey’s is 6.9%. The hold is what the operators keep — or hold — after wagers are settled with bettors. In this case it’s 90 cents for every $1 bet.
The high hold is bad for consumers because the sportsbooks will have to guarantee the money won, which in turn could affect betting lines. In addition, the hold could limit which operators want to do business in Tennessee, especially if other states don’t require such a high hold.
After undertaking a long process since Tennessee’s sports betting law took effect in July 2019, lottery officials said Wednesday they expect to be ready to finally take the first legal sports bets when sports resume nationwide. Tennessee will be the first all-mobile market in the U.S. Brick-and-mortar casinos and racetracks are still prohibited in the state.
Check Out: Latest updates and legal Tennessee Sports Betting Sites.
License Fees, Tax Rate Set
On Wednesday, the board also approved license fees ($750,000 a year), tax rate on gaming revenues (20%, also high among states) and license applications for operators. The documents could be online next week.
State regulators would then have to approve those operators seeking licenses. The state will approve or deny applications within 90 days of receiving them.
After the draft regulations surfaced and the state extended its public comment period on them into January, it appeared the state would have a more-reasonable 95% payout after discussion at a late February meet meeting.
Another controversial issue taken apart at that meeting was a proposed rule that called pushes in parlay bets a loss. In most states, pushes (ties between bettors and the sportsbooks) are voided and not counted as a loss to the bettor.
The board reconciled the parlay push, but delayed a vote on the regulations at the February meeting, hoping to finalize them in March.
Why The Hold Requirement Is Bad
A comprehensive study by Eilers & Krejcik, which was commissioned by the iDevelopment and Economic Association (iDEA), showed that the initial proposed 15% hold would cut into revenue Tennessee could raise, calling the proposal "fundamentally flawed policy.” The national average is about 7.5%, according to the study. The report identified these major issues with the hold requirement:
- A minimum hold requirement will result in sportsbooks offering substandard odds.
- Sportsbooks may have to further worsen odds on local teams to help balance risk.
- Sportsbooks will have to avoid large payout liabilities (e.g., big-pay parlays and futures or similar jackpot bets) to stay within the hold requirement.
The study suggested that bettors would travel to other states to bet or use illegal offshore sites to place their wagers.
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