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VOL. 44 | NO. 9 | Friday, February 28, 2020

Delay of game: Still no rules for online sports betting

By Kathy Carlson

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What were the odds it would take more than a year to implement online betting in Tennessee?

The Tennessee Education Lottery Corporation has hit a standstill in the adoption of rules for online sports betting. Nevertheless, hope remains that sports fans in Tennessee will be able to legally bet online in time for the 2020 football season.

When the General Assembly voted to legalize online sports wagering in April, it gave oversight to the TELC with input from a nine-member sports wagering advisory council. Its first meeting was seven months later in November.

“When the advisory council first met, they were given proposed rules,” says House Speaker Cameron Sexton, R-Crossville. “There started being concern and pushback from the advisory council and people in the industry about not having input” into the rules.

Sexton adds he and Lt. Gov. and Senate Speaker Randy McNally, R-Oak Ridge, spoke with sports gaming stakeholders and the TELC board before sending a letter Feb. 14 to the board’s chair, Susan Lanigan, asking her to delay a vote on the draft rules scheduled for the following week. No vote took place.

In the meantime, Tennessee is leaving money on the table. No rules and no betting mean no revenue for the state.

The hope was that some of these revenues could go to local governments, which are losing tax revenues as the Hall Income Tax on stock-dividend income is phased out.

Lanigan said at a Feb. 18 advisory council meeting that she wanted to give it one more draft of the rules before voting, and that McNally and Sexton had questions on the rules.

“We are committed to a thorough process that establishes and supports a responsible and competitive interactive sports gaming market in Tennessee,” the lottery board said in a statement made after that meeting, responding to casino.org, a guide to online casinos and gambling.

“We received valuable feedback today from the Sports Wagering Advisory Council and the Sports Gaming Committee of the Tennessee Education Lottery board of directors. The Board will discuss the feedback (at its February meeting) but no action will be taken. We’ve set up meetings to discuss the Lieutenant Governor’s and Speaker’s questions.”

Wagering Advisory Council member Tom Lee, a Nashville attorney and lobbyist, said he’d like to see a more open, collaborative process in developing the rules for sports betting. One possibility, he said, would be for advisory council members and lottery staff to work together to develop regulations, consistent with open meetings laws. The advisory council, set up to inform the Lottery board about best practices in sports gaming, had no input into the initial draft rules, he explains.

Lee says online-only sports gaming is new to Tennessee and regulating it “is not self-evident.” What’s more, he says, lottery gambling and sports betting are “two very different industries with complex challenges.” The lottery has been run very successfully in Tennessee without a hint of trouble, he continues.

“We’re very lucky. The lottery has done its job.”

Sports gaming, however, is a market that the state regulates, much as it regulates other markets and grants licenses to those who participate in those markets. “That is not the lottery model,” he adds.

The letter from Sexton and McNally to Lanigan specifically mentioned concerns that there might be no authorization in the sports betting statute for provisions in the draft rules for a three-tier system of licensing providers of sports-gaming services. Only one type of licensee is mentioned in the statute, which doesn’t mention a licensee’s vendors and subcontractors. Regulations must be consistent with the legislation that enables them to be created.

Sexton says other issues in the regulations include a proposed 85% cap on payouts to winners and a rule on parlay bets and tie scores.

The TELC website contains a summary of comments to the proposed rules. There are 323 items on the 17-page list of thumbnail comments. The most frequent comment, made by 60 commenters, opposed a rule on bets and ties. Thirty-seven commenters opposed the 85% cap.

Based on the frequency of comments, at least 60 organizations or people commented on the first draft of the rules.

Sexton says work is progressing on revisions to the rules.

“Since the letter, I think they’ve made a lot of changes that we’ve addressed,” Sexton says of the TELC board’s continuing work on the rules. “We’re hopeful that by football season, I think they could have it up and running.”

In a related development that indicates second thoughts over sports-gaming regulation, a bill was introduced in early February to give the sports wagering advisory council authority over sports gaming instead of the TELC board. Sponsors of the bill were Sen. Steve Dickerson, R-Nashville, along with Reps. Andy Farmer, R-Sevierville, and Rick Staples, D-Knoxville. Dickerson and Staples sponsored the 2019 sports gaming bill.

Sexton called Dickerson’s bill “an attempt to make sure that the advisory council is listened to,” and that it and the TELC board work collaboratively. There haven’t been any in-committee discussions on the proposal to shift control of sports gaming to the wagering advisory council, nor was there a fiscal note estimating how much it would cost when this article was written.

Last year’s online sports betting bill gave the TELC board 90 days to review license applicants before it decides on granting a license. Rules must be in place before candidates apply for licenses.

Meanwhile, Sexton can make one appointment to the sports wagering advisory council. His predecessor as speaker, Rep. Glen Casada, R-Franklin, appointed two of the three slots he could fill as speaker. In addition, McNally and Gov. Bill Lee made three appointments, one from each of the state’s grand divisions, as envisioned by the sports gaming bill. Sexton says he’s vetting appointment candidates. The appointee must be from West Tennessee.

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