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Summary of public comments on Tenn. online sports betting regulations released

Summary of public comments on Tenn. online sports betting regulations released

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As Tennessee moves closer to online sports betting, regulators have received extensive feedback on draft gaming rules, according to a summary of public comments released this week.

Online sports wagering became legal in Tennessee last July, but consumers haven’t been able to place bets because state officials are still finalizing how they will regulate and license operators.

The Tennessee Education Lottery Corp. — which the Tennessee Sports Gaming Act tasked with regulating the new industry — released draft rules and regulations for licensees last November. The agency then held a public comment period, which concluded Jan. 6.

The lottery has not published a copy of each individual response it received, but it released a summary of the responses received with a list of 323 points. Each entry briefly describes the comment and the number of responses for it.

Comments covered consumer concerns, technical questions about definitions, critiques of advertising regulations and a desire for more transparency, among other topics.

The two comments with the most submittals focus on a pair of controversial proposals.

One involves parlay wagering, which combines multiple individual wagers into one bet and depends on winning all of those wagers together. If one of the wagers results in a tie, sportsbooks often don’t consider that to be a loss and readjust the rest of the wager to exclude that leg from the parlay. Tennessee’s rules would require a parlay to be considered a loss in the event of a tie, which critics said conflicts with industry standards. Sixty respondents said the lottery needed to change the proposed rule on this, according to the summary.

The other point of contention is a draft rule that would limit a licensed operator’s annual aggregate payouts to 85%, meaning the operator would have to keep or “hold” 15% of total wagers made each year. Sportbooks usually have lower holds.

A recent report from Eilers & Krejcik Gaming, a research and consulting firm, criticized the proposed minimum hold requirement. The analysis is referenced in the lottery’s published summary of comments, which notes that 37 respondents weighed in with similar comments on the payout cap.

“The practical impact of the requirement is that legal sportsbooks in Tennessee are required to pay out no more than $.85 for every $1 wagered, resulting in a hold percentage of at least 15%. For reference, the natural hold percentage in other U.S. markets hovers closer to 7.5%,” the report states.

“The minimum hold requirement — which has almost no precedent in other regulated markets — therefore creates an unnatural market distortion.”

The analysis predicts the hold percentage would lead to worse pricing and products, potentially driving consumers to bet in other states or the illegal market. The report also states the minimum hold would decrease state revenue from sports betting and discourage operators from participating in Tennessee’s market.

The Tennessee Lottery has not offered a specific timeline for when it plans to issue its first licenses, but the Sports Wagering Advisory Council will discuss the draft rules at a meeting on Feb. 18.

All rules will ultimately need to be approved by the lottery’s Board of Directors, which will meet Feb. 19. The lottery’s goal is for the board to vote on the regulations at that meeting, according to lottery spokesperson Dave Smith.

“The 45-day public comment period provided the TEL with valuable feedback from potential players and operators as well as other stakeholders,” Smith wrote in an email Thursday. He said comments are still under review.

tdodson@bristolnews.com | 276-645-2567 | Twitter: @Tim_Dodson

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