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State of the Union: US Sports Betting Update – Tennessee Defies the Odds to Legalise Sports Betting

Tennessee became the 12th state to legalise sports betting when Gov. Bill Lee returned HB 1 without his signature this week. It means that online operators can now launch in the Volunteer State if they pay a flat rate licensing fee of $750,000. It also entitles Tennessee to a 20% cut of all revenue in tax and that money can be ploughed into public services across the state. It should be great news for sports fans that want to wager in a safe, secure and legal environment, but nobody is particularly happy about the new law.

Lee opposes gambling on a philosophical basis and he refused to lend his signature to support this cause, although he still allowed it to become law. Yet that was only after the General Assembly removed brick and mortar sportsbooks at casinos from the legislation in order to keep him sweet. Lee feels that casinos “prey on poverty and encourage criminal activity”, representing the “most harmful form of gambling”, and he was vehemently opposed to retail sportsbooks. It means that Tennessee is the first state to introduce online-only sports betting.

Online wagering dominates in states like New Jersey, where both retail and online sportsbooks operate, and in mature gambling jurisdictions around the world. There are no casinos in Tennessee, and Lee is pleased to see sports wagering confined to mobile phones and computers. Other lawmakers voiced even stronger opposition to the legislation, with Rep. Andy Holt likening sports betting to slavery in a bizarre analogy. Rep. Jason Zachary drew parallels with the state’s opioid crisis. Rep. Bob Ramsey managed to include a ban on prop bets on college sports. The bill eventually passed through the Senate and the House by thin margins and many lawmakers are unhappy.

A Dangerous Precedent

Yet the industry is also less than thrilled. Firstly, it sets a dangerous precedent by forcing operators to purchase official data from the leagues in order to settle in-play bets. This is a major victory for the likes of the NBA and MLB, who have lobbied hard for greater financial remuneration as sports betting spreads like wildfire. No states have thus far caved in by awarding the leagues the dreaded integrity fee, but this will embolden them as they continue their lobbying efforts.

A 20% revenue tax for online sportsbooks is also pretty high. They would need to invest in customer acquisition in this new jurisdiction, and they would not be operating on particularly high margins anyway, so this could deter some companies from launching. That would create a lack of competition, which is bad for the bettors. They may also be annoyed that they cannot visit a physical sportsbook and enjoy the camaraderie that sports fans in Nevada, Delaware, New Jersey, West Virginia, Mississippi, Pennsylvania, Rhode Island, New Mexico, Montana, Indiana and Iowa can revel in. Yet lawmakers have set ambitious revenue targets and they believe the state’s coffers will gain a $20 million boost during the first year after launch and $40 million in the second year.

Movement Spreads Across America

The US Supreme Court struck down PASPA in May 2018 and over the past year sports betting bills have been launched in 38 different states. Plenty of anti-gambling sentiment exists across the country and progressive lawmakers bidding to introduce sports wagering have faced considerable obstacles. In many states, opposition from conservative forces has been enough to kill off sports betting bills. Just this week, Sen. Danny Martiny’s bill, SB 153, was all but annihilated by the House Appropriations Committee.

Yet the effort to legalise sports betting across America is still surging with momentum and a huge chunk of the population will be covered when sportsbooks are launched in Tennessee, Montana, Indiana and Iowa. The largest states are yet to usher in sports betting industries, although there is a good chance that New York and Illinois will do so this year. New York is still wrestling with a complex framework for sports betting, while the sports betting bill in Illinois is becoming increasingly weighed down by amendments that operators will hate, so there is still much work to be done in both states. 

The next in line to legalise sports wagering are New Hampshire and North Carolina. HB 480 has gained widespread approval in New Hampshire after the House voted overwhelmingly in favour of it and the Senate gave it the thumbs up again this week. It now goes back to the House for concurrence on some minor amendments and it will then move on to the governor’s desk to be signed into law. The Senate in North Carolina has passed a bill that adds sports betting at the state’s tribal casinos and the House is tipped to follow suit in the days ahead. That would take the overall total to 14.

Pennsylvania Market Maturing

Pennsylvania has thus far been held back by a lack of online sportsbooks and that has seen its monthly handle and revenue figures pale in comparison to those posted by neighbouring New Jersey. Yet that all changed this week when Philadelphia casino SugarHouse launched an online betting site that can be accessed by sports fans across the state. It is available via Mac, PC and Android phones, although it cannot yet be accessed on iOS as Apple is clamping down on new apps that are “wrapped versions” of an operator’s website.  

It is not unclear when it will be ready to launch on the iPhone, but the operator was keen to ensure this glitch did not tarnish the occasion. “It’s just an unbelievable day for us at SugarHouse and for sports bettors across the commonwealth,” said Evan Davis, general counsel for SugarHouse Casino. “We see in New Jersey the appetite for wagering on sports online.” It runs an online sportsbook in New Jersey, but its revenue is dwarfed by the likes of FanDuel and DraftKings. They are expected to launch in Pennsylvania eventually, while Parx and Rivers should unveil sports betting sites imminently.

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