Tennessee Online Sports Betting — Legal And Soon-To-Be Live

Donnie Peters

In 2019, Tennessee joined a growing number of states to legalize sports betting. The momentous legislation came when the legislature passed HB 0001 in May 2019, and Governor Bill Lee let the bill pass into law without his signature.

On this page, we will review Tennessee’s legal sports betting landscape, and look at what we know and what Tennesseans can expect from legal TN sportsbooks once they debut in the second half of 2020.

When will legal Tennessee sportsbooks launch?

Tennessee being a “non-gaming” state — one of only a dozen states where there are no tribal or commercial casinos — the rule-making and regulation phase for legal sports gambling has taken a good chunk of time.

A final set of sports betting regulations were adopted on April 15, 2020 by the Tennessee Education Lottery Corporation (TELC), which will maintain regulatory oversight over legal TN sports betting. Officials are still ironing some logistics as they accept sportsbook applications for licenses.

Tennessee lawmakers do not seem desirous of opening brick-and-mortar casinos, by the way.  The sports betting law creates a framework for online and mobile sports betting only. In fact, Tennessee became the first state to pass a mobile- and online-only sports betting law. This design could provide a great example for other states to follow in the future, with legalizing sports betting through online channels exclusively.

The goal is for the Volunteer State to have the first legal sportsbooks available between July and September  2020. Although no firm date has been set yet, signs point to the state having legalized sports betting up and running for the start of football season — assuming, of course, football seasons do proceed in 2020, as the nation wrestles with the COVID-19 pandemic that sidelined professional sports worldwide in the Spring of 2020.

Getting started at Tennessee online sports betting sites

As in every state where legal sports wagering exists, there are various restrictions concerning age, what types of bets people can make, on which sport events, and so forth.

Age limit

Anyone looking to place legal sports bets in Tennessee will need to be at least 21 years of age. There will be no exceptions to this requirement.

Location

Tennessee does not plan to be opening any brick-and-mortar casinos or sportsbooks as part of this legislation. Those looking to wager on sports in the Volunteer State will be able to sign up for an account via online platforms or mobile applications. But note that bettors must be physically located within state boundaries in order to place a bet.

Sportsbooks will need to use geolocation software to determine that bettors are located within state boundaries in order to place a bet. As is standard practice with geolocation software, if one’s location is unable to be verified as within state boundaries, you will not be able to wager.

Registering

Registering an account with a legal Tennessee sportsbook will be a simple process once the market opens up. The process is likely to mirror what we see in other states and bettors will need to submit all or some combination of the following information.

  • Name
  • Age
  • Address
  • Social security number
  • Phone number
  • Email

With Tennessee taking an online and mobile approach to sports betting, registrants will need to create a username and/or password for an account.

Depositing and withdrawing

Similar to the registration process, it is expected that Tennessee will have similar banking options for its legal sportsbooks, providing enhanced levels of safety and security as opposed to offshore, unregulated sportsbooks.

We fully expect that banking options in Tennessee will be up the standard of other states.  Below are the some of convenient banking options we expect to see available in Tennessee:

  • ACH/e-check
  • Online banking transfer
  • Prepaid cards
  • PayPal and Skrill

Tennessee online and mobile sportsbooks

The roster of Tennessee sports betting operators is to be identified. Good news is, there is no limit in place for how many operators can receive a sports betting license in Tennessee. As long as an operator is approved by the regulatory body, and pays a hefty $750,000 annual fee, it will be able to offer sports betting in the state.

Although the annual fee and tax rate on revenue is not small, at least operators will not need to latch onto a limited number of land-based casinos for sports betting licenses — and pay a corresponding access fee — to operate in the state.

Below is a list of potential operators to offer sports betting in Tennessee:

Mandatory 10% minimum hold requirement

The most controversial, complicated aspect of the TN sports betting rules was the TELC’s proposed “payout cap” requirement. The first version of it would have required sportsbooks to pay back to bettors no more than 85% of all bets taken. In other words, a mandatory 15% hold.  This may work in fixed-matrix lottery games, or in parimutuel horse racing, but not sports betting, where in Nevada and New Jersey, sportsbooks keep on average about 5.5 to 7% annually.

This misguided rule threatens the core of TN sports betting (15.1.9: Rule Governing Capped Payout), and fortunately the rule in its final form became less offensive, but still will impact the quality of the offerings and payouts that bettors see. We speculate that sportsbooks will meet the annual 10% minimum hold requirement by pricing up parlays, or perhaps making prop bet odds less favorable, but keeping the pricing scheme in other areas largely the same as in other markets (-110 both ways).

We shall see. It’s disappointing and something we will be monitoring.

FanDuel Sportsbook and DraftKings Sportsbook in Tennessee

DraftKings and FanDuel have been major players in nearly all of the legalized sports betting markets across the U.S., and we fully expect both operators to seek licensing in Tennessee. Both already offer daily fantasy sports (DFS) to those in Tennessee and it is expected that sports betting will follow.

Bettors in Tennessee should expect the same industry-leading products from DraftKings and FanDuel that the two operators offer in other jurisdictions. Both companies have plenty of experience operating as online and mobile platforms, so there should be no issue with Tennessee not having brick-and-mortar establishments.

Of course, DraftKings and FanDuel will need to be approved for a Tennessee sports betting license, but this feels more like a formality at this point.

Land-based sportsbooks in Tennessee

There currently are no casinos or sportsbooks in Tennessee and there are no plans for such land-based venues to open. Tennessee’s sports betting industry is designed as a mobile- and online-only industry.

Some may wonder if Tennessee’s sports betting industry could suffer or not reach its full potential without having land-based sportsbooks available. This shouldn’t be the case, as other states have shown us that mobile and online sports betting accounts for the largest revenue generation in states where both are offered — as much as 90% in New Jersey now.

Laws and regulations

When the Professional and Amateur Sports Protection Act (PASPA) of 1992 was struck down in May 2018 by the U.S. Supreme Court, sports betting effectively became a state’s right issue.  Since then, almost two dozen states have hopped on the legal sports wagering bandwagon and Tennessee is one of them.

Tennessee became the fourth state to legalize sports betting in 2019, following Montana, Indiana, and Iowa who also legalized sports betting that year.

Of course, legal sports betting comes with new laws and regulations. Here is a look at details of Tennessee’s sports betting laws.

  • Tennessee Education Lottery Corporation to oversee the state’s sports betting industry
  • Online- and mobile-only sports betting operations; no brick-and-mortar sports betting
  • $750,000 annual licensing fee
  • $50,000 application fee (nonrefundable)
  • No limit to how many operators can apply
  • Licensing fees go to Tennessee Promise Scholarship fund
  • 20 percent tax on adjusted sports betting revenue for licensed operators
  • Tax revenue to be distributed to education, local governments, and gambling addiction programs
  • Must be 21 years of age or older to place a bet
  • Must be located within state boundaries to place a bet
  • In-game prop bets on college sports prohibited
  • Operators must utilize “official league data” for in-play wagering. This could be an obstacle for some providers, which would restrict in-play betting for those that do not seek official data.

The 20 percent tax rate on gross gaming revenue will apply to all operators and is on the higher side of tax rates. The $750,000 annual license fee is also fairly high. For comparison, New Jersey’s fee to apply for a sports betting license is $100,000 and online sportsbooks pay a flat 13 percent tax on gaming revenue.

History of sports betting in Tennessee

Until the passing of HB 0001, legal sports betting in Tennessee has been virtually nonexistent. The state does not have brick-and-mortar casinos or sports betting establishments. The closest things would be horse racing and daily fantasy sports (DFS). State lottery games began in 2004. When Tennessee announced that it would be pursuing legalized sports betting, it came as a bit of a surprise given the state’s history with gambling.

Rep. Rick Staples started the charge by introducing HB 0001 in November 2018. The bill underwent some amendments and was eventually shaped into form. A ban on prop betting for college sports for implemented before the bill was advanced out of committee and to the statehouse. There, more amendments were made that saw the tax rate increased from 10 percent to 20 percent and the licensing fee jump from $7,500 to $750,000.

An additional amendment was added to require operators to use official league data in order to offer in-play wagering. In-person registration was originally going to be required, but this requirement was removed.

Following the amendments, in April 2019 HB 0001 passed the House by a vote of 58-37 and then moved to the Senate, where it also passed, this time by a vote of 19-12. At the time, the legislation was monumental in that it made Tennessee the first state to legalize sports betting for online and mobile only, without the requirement of land-based sports betting.

Although he had expressed some concern over the bill, Gov. Bill Lee let the bill be passed into law without his signature.