The US state of Tennessee is gearing up for a new era of sports betting and has officially licensed three sportsbook operators for the opening of the new market on November 1.
The state initially approved the license applications of FanDuel, DraftKings, and BetMGM, who have been awarded the first three online-only sports betting licenses in the state. All of the licenses were approved by the Sports Wagering Committee of the Tennessee Education Lottery.
Earlier in the month, the Chair of the Committee, Susan Lanigan, underlined the work that had gone into getting the state ready for its big launch:
Since the initial three licenses were awarded, Tennessee has awarded a license to Tennessee Action 24/7, along with licenses for sports betting data suppliers Amelco and Swish Analytics.
Overdue for Launch
The launch, when it arrives, is long overdue. The foot-dragging in Tennessee has been one of the most notable examples of legislative and regulatory delays in the fast-growing sports betting market in the US. In fact, sports betting became legal in the state back in May 2019, which means it will have taken the state 18 months to get the market up and running.
To put that delay in perspective, another six states have been through the legalization process and launched their markets during that 18 month period. One of those six, Colorado, has already passed the $100 million handle mark after being operational for four months, while Illinois recorded an impressive $50 million figure for its first month of operation. Virginia, which only began legislative moves to introduce sports betting in July 2020, will launch its own legal market in January 2021.
On the face of it, we can expect plenty more sportsbook companies to be looking at entering the Tennessee market. The big attraction in this state is the relatively friendly regulatory regime, with no cap on license numbers and a license fee of $750,000 per annum.
Yet there is a downside for many would-be entrants. Tennessee is the only sports betting state in the US that has implemented a holding requirement. This requires all operators in the state to have a hold of at least 10%, and failure to abide by the rule could lead to license suspension or fines.
One option for operators faced with this rule could be to increase their take, but that would put them at a significant disadvantage compared to offshore companies. US sports betting may be in its infancy, but customers are already showing considerable discernment in where they place their bets. For example, in DC, it has become apparent that customers are opting to avoid one online operator, Intralot, in favor of a William Hill retail sportsbook due to Intralot’s perceived uncompetitive prices.
The original proposal for the hold was 15%, but even at the lower figure, the rule could prove enough of a disincentive to leave some operators to think twice over entering the long awaited market.