According to a study by the National Research Group, legalized sports betting could lead potential gamblers watching more sports live on TV.
Online sports gambling has been legal in the state since the Tennessee Sports Gaming Act was enacted on July 1.
But don’t expect to place bets any time soon.
The bill, which allows residents to participate in sports gambling online, became law after passing the state Senate and House. It took effect without Gov. Bill Lee’s signature.
“I do not believe the expansion of gambling through online sports betting is in the best interest of the state, but I appreciate the General Assembly’s efforts to remove brick and mortar locations,” Lee said in a statement after the legislation passed.
So why aren’t bets taking place yet?
The law calls for the Tennessee Education Lottery Corporation and its board to create the rules and regulations needed to allow gambling in the state.
In addition, the law mandates the creation of a nine-member lottery corporation sports wagering advisory council.
Three members each will be appointed by the governor, the lieutenant governor and speaker of the House. The council will advise the lottery board on best practices, private administrative and technical assistance regarding sports gambling and carry out “any other duties as prescribed by the (lottery) board.”
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So far, not all nine members have been appointed.
Former Tennessee House Speaker Glen Casada, who stepped down from the role after months of controversy Friday, appointed two members to the advisory council the day before his resignation.
The two appointees were Knoxville attorney John Valliant Jr. and lobbyist Thomas Lee. They will serve three- and four-year terms, respectively.
House Speaker nominee Rep. Cameron Sexton will most likely select the third, but he won’t formally become speaker until after an Aug. 23 special legislative session.
Lt. Gov. Randy McNally has also appointed two members of the council, including former FBI agent Brian Fazenbaker, who will serve a three-year term, and Knox County’s Chief Deputy District Attorney General Samuel Lee, who will serve a four-year term.
Lee has not yet appointed any members.
As a result, the council is not fully formed, more than a month after sports gambling became legal. Additionally, little has been announced on the lottery’s progress in getting the state’s gambling infrastructure up and running.
According to lottery officials, the regulations needed for players to start gaming have yet to be established.
“As required by the Tennessee Sports Gaming Act, the Tennessee Education Lottery Corporation is working to create the necessary rules and processes required for online sports wagering,” Tennessee Lottery spokesperson Kym Gerlock wrote in an email. “There is no timeline at this point, but we will post updates to our website as they are available.”
Rep. Rick Staples, the original sponsor of the House bill, said that, while he has been checking in for periodic updates, he is not directly involved in the creation of the regulations.
“I just needed to create the statute to give them the base and parameters to work within,” he said. “The lottery board has a history of doing things right, and they know what they’re doing.”
Staples said he doesn’t expect the regulations to be in place before January.
Online-only gambling in Tennessee
Since a landmark U.S. Supreme Court decision in May 2018 that allowed for the legalization of sports gambling across the country, many states have authorized the potential billion dollar industry. Currently, there are 18 states that have legalized sports wagering in some form.
But Tennessee is unique. It is the only state to have legalized sports gambling online only, giving players the opportunity to bet on mobile apps, while still outlawing physical gambling operations.
This is a worry for American Gaming Association Senior Vice President of Strategic Communications Casey Clark.
The AGA is an organization that advocates for policies and regulations that promote the gaming industry in the U.S.
One of the larger priorities for the organization, Clark said, is staving off illegal activity surrounding gambling. He said that combating the illegal market means giving consumers access to “safe, regulated gaming.”
“In order to do that, you need to offer the same access in the legal market that is in the illegal market,” he said.
He said that Tennessee’s legalization of just online wagering is worrisome due to the possibility that gamblers will seek out illegal options to practice in non-sanctioned physical sportsbook locations.
Despite these concerns, Staples said that Tennessee’s online-exclusive setup is a positive for the state.
“Tennessee is ahead of the curve and setting a standard with this piece of legislation,” he said. “We’re leading the nation in interactive, online and mobile sports betting, especially in the Southeast region.”
Staples said that physical locations are not a hurdle for the legislation because businesses such as bars could choose to create a gambling app for customers and limit use to the building via a “geo-fence,” or virtual boundary. This will allow businesses to capitalize on sports fans’ gambling without losing money to casinos, according to Staples.
Gambling’s financial impact on Tennessee
The law calls for a 20% “privilege tax” on online gambling in Tennessee.
Revenue from the privilege tax will go to several different entities: 80% to the lottery for education account, 15% will be distributed quarterly to each local government in the state “on a per capita” basis for infrastructure projects and 5% will go to the department of mental health and substance abuse services in order to oversee grant programs for gambling addicts.
The department may also use the 5% for its administrative costs and costs of professional services related to overseeing the grant programs.
The ability to gain money for infrastructure projects in areas across the state is the “highlight” of the law for Staples.
“It’s the reason I started the legislation … dollars going home to local areas that they can use for infrastructure and road improvements,” he said. “I think the dollars we get in will be surprising enough that we won’t even talk about starting a state income tax.”
Staples said that the General Assembly’s Fiscal Review Committee expects $50 million in tax revenue each year from sports gaming in Tennessee. Additionally, the legislation’s fiscal summary states that the law will add “additional jobs and consumption expenditures within the economy.”
Staples said that the $50 million estimate is “conservative” due to potential platform vendors stating that the industry could be worth much more.
The state representative knows of eight vendors that are already interested in setting up their sports gambling platforms in Tennessee, and one these vendors believes that they can make $1.3 billion working in the state’s sports gaming industry, according to Staples.
“And we would be taxing what they would be making in the 20% range, so that would be a lot of money coming in from just one vendor,” he said.
Staples declined to say which potential vendor provided the $1.3 billion figure.
FanDuel, an online sports betting company with over six million registered users, plans to jump into the Tennessee sports gambling industry as soon as regulations are set, according to a statement sent to The Tennessean.
“We’re looking forward to working with Tennessee as they create a sports betting industry in the state and hope to begin accepting wagers as soon as possible,” the statement read.
The Associated Press contributed to this report.
Reach Andrew Wigdor at email@example.com and on Twitter @andrew_wigdor
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