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VOL. 45 | NO. 1 | Friday, January 1, 2021

Tennesseans go all-in for online sports betting

State’s bettors set first-month U.S. record at $131.4M

By Tom Wood

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The COVID-19 pandemic that impacted every facet of life in Tennessee this year also slowed the debut of online sports gambling across the state – but not the enthusiasm of bettors.

Even though its launch was delayed until Nov. 1, Tennessee enjoyed the best first month in U.S. betting history, two Las Vegas-based websites that analyze and track sports betting across the country report.

In late December, the Tennessee Education Lottery, which licenses and regulates interactive sports gaming in the state, reported that gross wagers from Nov. 1-30 exceeded $131.4 million. That is nearly $100 million more than the previous high of $35.2 million reported by Indiana in its September 2019 launch.

“Our first month of sports wagering in Tennessee comes at a unique time in the world, let alone the sports world,” says Rebecca Paul Hargrove, TEL president and CEO. “November’s figures include adjustments and indicate potential. It is only one month in an unpredictable and extraordinary year, making it difficult to begin extrapolating out from this single month.”

It was a win-win-win for the state, operators and bettors alike, says Jessica Welman, analyst for PlayTenn.com.

“Talk about getting the market off on the right foot,” she says. “Tennessee is a market with enormous potential but untested, making it difficult to predict how bettors would react to start. By topping the next-best debut by nearly $100 million, I’d say that verdict is now in and it is a good one.”

Matt Prevost, chief marketing officer for BetMGM, says the state’s handle (total wagers) and bettor engagement “exceeded our internal expectations by 50%. We were incredibly pleased with the market reception to sports betting. $131million in handle in the first month makes Tennessee a meaningful market and compares favorably to the first month of sports betting in states with similar populations, like Colorado and Indiana.”

Tina Hodges, president of fledgling Nashville-based sportsbook Tennessee Action 24/7, says she isn’t surprised by the huge first-month numbers despite setbacks caused by COVID-19.

“In the last 30 days, our bet count is up over 320%, and our handle is up over 400%,” she adds. “Our numbers are just phenomenal every weekend. The growth is tremendous.

“It was (a) much more difficult (launch) than we thought because of COVID-19. If not for COVID, the state probably would have been up and running in the summer. So that slowed down the launch, it slowed down the licensing – all those sorts of things were delayed. But once we got launched, then we had much better response than we thought. It’s just been great.”

There were early signs of great expectations when TEL announced that $5 million was wagered on Day One and $27.4 million through Nov. 8.

“The Tennessee market is one of the more interesting ones in the country because it’s the first one to launch with only online sportsbooks and no physical sportsbooks,” says Adam Candee, managing editor of LegalSportsReport.com. “A lot of people are paying close attention to the successes and challenges in Tennessee to see how that could be replicated in other places.”

First-month gross payouts from the four current operators – BetMGM, DraftKings, FanDuel and Tennessee Action 24/7 – topped $118.2 million, and the state’s total tax revenue for the period was $2,363,918.

Of that tax revenue, 80% will go into the Lottery for Education Account, 15% will be deposited in the state’s general fund and 5% will be allocated to the Department of Mental Health and Substance Abuse Services to oversee grant programs for problem gambling treatment services.

Mary Linden Salter, executive director of Tennessee Association of Alcohol, Drug & other Addiction Services, which is funded by the state, suggests “a kind of COVID boredom relief” boosted interest in gambling.

“People have been at home, kind of filling time and not doing their usual activities,” she points out. “When something becomes available that seems fun and potentially when you can win money, it gets peoples’ interest.

Tennessee Action 24/7 sportsbook’s promotional event during the SEC Championship football game drew prospective gamblers to the DawgHouse Saloon at 1522 Demonbreun Street in Downtown Nashville.

-- Photograph Provided

“So, it became legal at a very bad time in terms of our ability to deal with some of the isolation issues. Things like gambling or any kind of addiction are always made worse when people are depressed and anxious – which this whole situation is certainly already exacerbated.”

It will be interesting to see how the December numbers fare. They could be released as early as Jan. 6 at a meeting of the TEL’s Sports Wagering Committee. That also could be when action is taken on the operator applications of BetAmerica, William Hill, WynnBet and ZenSports.

Here’s a closer look at key players and issues surrounding online sports betting.

Regulating the industry

The new sports gaming industry falls under the umbrella of the Tennessee Lottery, but Hargrove is quick to point out that online gambling isn’t run hands-on like the lottery.

“I keep reminding everybody (that) we regulate only, we don’t operate. We license and regulate,” Hargrove says.

“In this role, we will be focused on establishing and supporting a responsible and competitive program. We’re working with all licensees, registrants and applicants to protect the consumer and promote fairness in sports.”

And beyond the Coronavirus effects that slowed things, the Lottery staff has been working double-duty to build a sports gaming regulatory agency from scratch.

They established license application and annual renewal fees of $750,000, handle the reporting and collection of taxes. Operators and suppliers had to be vetted, a statewide Sports Gaming Advisory Council was appointed to determine fines for violations, compliance and any other issues that might arise.

“So far, it seems that it’s been a fairly seamless launch,” Candee says. “In terms of where Tennessee fits into the bigger picture in the country, the tax rate of 20% on gross revenue is, I would say, on the higher end of what’s out there in the country. There are certainly some questions about the 10% minimum hold requirements set by (regulators), still some questions as to how that’s going to be enforced.”

Pro sports impact

The $131.4 million November launch can largely be attributed to timing. It came in the middle of the NFL and COVID-shortened college football seasons. And that pro sports impact should continue as both the NBA and NHL begin their seasons.

“The best-ever launch for online sports betting is perhaps a surprise to some, but Tennessee also debuted with enormously favorable circumstances, many of which came by design,” explains Dustin Gouker, another analyst for PlayTenn.com. “First, it debuted in the heart of the NFL and college football seasons in a region that is particularly football crazy. And with the top operators in the country jumping in early to take advantage of the football season in full swing, it was a debut month like no other.”

Multiyear partnerships have been established with Tennessee’s major pro franchises. The NFL Titans aligned with BetMGM, while the NHL Predators struck a deal with DraftKings. The NBA Memphis Grizzlies aligned with FanDuel.

“We are thrilled to bring BetMGM to the state of Tennessee,” Gil Beverly, the Titans’ senior vice president and chief marketing and revenue officer, said when the deal was announced in September. “BetMGM will deliver new experiences and levels of engagement to our fans … as an official partner.”

The Grizzlies announced their deal in early November and the Predators in early December.

“We are thrilled to have FanDuel as our first sports betting marketing partner and as our exclusive daily fantasy partner. … We are looking forward to helping them find new ways to access their sports fandom,” Grizzlies president Jason Wexler says.

An Action 24/7 employee shows a prospective gambler how to use the Action 24/7 app.

-- Photograph Provided

“With legal sports betting now live in Tennessee, we are thrilled to announce our formal relationship with industry-leading DraftKings,” adds Chris Junghans, EVP and chief revenue officer for the Predators. “We look forward to … seeing everything that this partnership will bring to our state and to our fans.”

BetMGM also is the official sports betting partner of NASCAR, which returns to Nashville SuperSpeedway in Gladeville, in June with its first Cup race.

“The fan base of NASCAR is very interested in betting,” BetMGM executive Prevost says. “We really value the relationship we have with NASCAR.”

The rookie bookie

Action 24/7 president Hodges takes pride in being a startup sportsbook operator ready to take on the deep-pocketed high-rollers from Las Vegas, New Jersey and Boston, with several others waiting to be approved, including Churchill Downs’ BetAmerica.

Hodges is betting that her Nashville-based company will connect with fellow Tennesseans in ways the big books can’t.

“It was Evel Knievel who said, ‘If a guy hasn’t got any gamble in him, he isn’t worth a crap.’ I think, personally, risk-taking is something that I have become much more comfortable with as I’ve gotten older,” the 45-year-old Hillwood High School graduate says with a laugh.

“That’s what people enjoy about sports gambling – just get out there, try it, do it and you’ll win. (Launching a sportsbook is) exciting and a big gamble. But I’ve taken some chances on Tennessee before and won, and so I really like our chances.”

Following completion of education at Vanderbilt University, Hodges worked in the nursing profession before she joined husband Mike at Advance Financial lending company, which he started in 1996. She says the sportsbook operation is similar to the payday loan business.

“Our lending business is largely a digital business,” she explains. “We move a lot of money in the United States digitally.

“And online gambling is similar – lots of suppliers, lots of customer service, making sure that you’re offering the best product out there for your customers and that they’re getting their money in a timely fashion.

“One thing that is unique to (Action 24/7) in Tennessee – we’re the only licensee that has same-day pay. And that probably doesn’t mean anything unless you like to gamble on sports because some of the other sportsbooks like to hold your money when you win. We just don’t believe in that. If you win today, you should get paid today.”

The BetMGM section

Tennessee’s entry into online sports wagering is a bit of a homecoming for BetMGM executive Prevost.

“A long time ago (back in the 1990s), I used to live in Tennessee. I lived in Germantown, just north of Memphis, for a little while,” Prevost, 49, says. “I’ve spent some time, although not as much time as I’d like, in Nashville. It’s a wonderful city that has completely transformed over the last however many years.”

Prevost is more knowledgeable of the current Memphis market because of the MGM property Gold Strike Casino Resort in nearby Tunica, Mississippi, but says he is excited to grow the Nashville connections because of the Titans and NASCAR relationships.

Prevost says the Titans, 10-5 going into the season finale at Texas Sunday, are the No. 1 team that BetMGM’s Tennessee customers bet on.

“At this point in the year they are the team that attracts most of the bet volume in the state and they’re on – hopefully – a historic run,” he points out. “They’ve had really good success with Derrick Henry and the whole team. But we haven’t really seen the effect of the Grizzlies or the NHL as of yet because the season hasn’t started. And so, we’ll see where we end up with.”

One gambler’s story

His name is Allan, and he’s been an online sports player since Day One. Averaging 70 bets a week, which he tracks on an Excel spread sheet, Allan was up about $1,000 after the Lions-Titans game Dec. 20.

Allan says all the apps are easy to use, downloading them onto his cellphone.

“I’d never had any background in (gambling) at all. I just randomly saw the ads for it,” he says.

Customers keeping up with the action on their phones during the Action 24/7 event during the SEC Championship football game.

-- Photograph Provided

“When they first got here, they offered you a lot of promos. Like, you got $200 free dollars or a free deposit match. They definitely try to have incentives to get people to play. So, it’s a good way to just kind of spread your money around.”

Allan’s favorite team is the Titans, but he admits to betting against them to cover a spread. Case in point, the Titans’ 41-38 home loss to the Cleveland Browns Dec. 6.

“My main team is the Titans, so kind of what I do is I try to not bet for them or I bet against them so that either way I have a good Sunday,” Allan explains. “Like (that) Sunday I bet for the Browns. And even though we lost, it made me feel better that I wasn’t out money,” he chuckles. “So, yeah, it does add a little bit of extra interest to the game.”

Allan also places “stupid bets” like one he placed during the Arizona-Philadelphia game Dec. 20.

“I bet $200 that the Cardinals would get a first down. That’s a stupid bet. Like, I have no idea if they’re going to get a first down or not,” he says with a laugh. “I won. I mean, I usually win those, because if you watch NFL games you kind of know-how the pace goes. But, yeah, that’s a really bad bet – I just got lucky.”

He says he doesn’t fare as well with college basketball and marvels at some of the outlandish bets and various sports that friends will place wagers on outcomes.

“There’s all sorts of stuff you can bet on. Like, I know some dudes who have bet on Chinese basketball, which is hilarious,” he says. “It’s hard to even see the games. They’re really just risking it all off something they have no concept of.”

Proliferation of ads

As Allan notes, ads promoting the various sportsbooks are on television, radio, print, social media, billboards, etc.

BetMGM has Jamie Foxx as a celebrity spokesman, which raises this question: in music-rich Tennessee, will we soon see country stars touting online sports wagering? Or perhaps a retired sports figure?

“I think we’re going to look for local opportunities,” Prevost says, “and I don’t want to give a heads-up to what we might be doing strategically, but I think we’re going to continue to try to localize the experience and engage with Tennessee fans and customers.”

BetMGM’s ads feature the trademarked tagline ‘King of Sportsbooks’ which were spoofed by Memphis pro wrestler Jerry ‘King’ Lawler in a couple of Tweets last month – calling himself ‘the real King of Sportsbooks’ with the Action 24/7 logo prominently featured.

“We served them a cease-and-desist (letter) just in that they were using the likeness of our trademarkd tagline of ‘King of Sportsbooks’ as well as a similar font, coloring and whatnot. So, the process is really just about protecting our (intellectual property) rights for such data,” explains BetMGM representative Elisa Richardson.

Action 24/7’s Hodges called it ‘a fun little spoof” that is “all over now,” adding that Lawler still works with her company but will not post similar Tweets in “as it relates to MGM.”

Her company got good exposure from TV ads seen before the SEC Championship and Lions-Titans games. Hodges had crews at bars in Nashville, Jackson and the Tri-Cities area promoting and registering customers during the SEC Championship.

“We’re just trying to get out the word that we are the only Tennessee owned and operated sportsbook and give us a chance,” she says.

Betting on the borders

Another factor which may have boosted the first-month wagering is the fact Tennessee borders eight states – North Carolina, Virginia, Kentucky, Missouri, Arkansas, Mississippi, Alabama and Georgia – and residents of those states can drive across the border, place their bets and then go back home.

A geo-system the state uses tracks bets, which must be placed inside Tennessee.

“You can’t place a wager when you’re outside of the state,” Hargrove says. “So, we actually get a map of every transaction that’s been attempted and if it’s attempted outside of the state, it’s blocked. We haven’t had anyone physically able to accept transactions outside of the state.”

Candee sees how that can benefit Tennessee’s tax coffers.

“Tennessee geographically has an advantage in the region by being the first state that has online sports betting in a legal market,” he says, adding that New Yorkers cross into New Jersey to use legal online sports betting.

“That certainly is a dynamic that we expect could play out elsewhere in the country as well,” he adds.

Gambling addictions a concern

Salter, executive director of TAADAS, says calls to the 24-hour Tennessee Redline (1-800-889-9789) to report gambling addiction problems have increased since the Nov. 1 launch, compared to the same time last year.

“For November 2019 we had one online gambling addiction call. That number would be pretty typical each month,” she states. “We would rarely get as many as three per month. For November 2020 we had 13. “For November 2019, we had 11 total gambling addiction calls and in November 2020 we’ve had 51. Total calls include casino, sports and online gambling.

“So we know that those numbers reflect an increase in sports betting that has become problematic.”

Prevost notes that his company takes gambling addiction problems seriously.

“Our view is that responsible gambling is a critical component to our success,” he says.

“We applaud what the Tennessee regulators have done as it relates to putting responsible gambling front and center. And, so, we are, as an operator in the state, every one of our ads has a message as it relates to responsible gambling.”

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