Tennessee’s Road to Legalized Sports Gambling

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Tennessee’s Road to Legalized Sports Gambling

Tejas Ogale

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Tennessee is one of the latest states to join the growing trend of passing legislation to legalize online sports gambling, with the Tennessee Sports Gaming Act (TSGA) coming into effect this past summer. Following the early 2018 Supreme Court ruling in Murphy v. National Collegiate Athletic Association, the door was opened for each individual state to legalize the billion dollar industry that is online sports gambling; however, although online sports betting is now nominally legal within the borders of Tennessee, prospective gamblers still face roadblocks before they can place bets.

It is important to note a few distinctions between Tennessean legislation on sports gambling and legislation passed in the 18 other states to legalize sports gambling; Tennessee is the only such state to legalize sports gambling online while outlawing physical sportsbook locations. Furthermore, the bill also requires that a nine member advisory council is created to oversee and regulate sports gambling within the state before any betting takes place. The Tennessee House, Senate, and governor each get 3 nominations to the council. Filling the council has been a slow and arduous process. In August, five of the nine seats were filled, which meant the council officially had enough members to conduct business. Despite this, no earnest efforts to do so were made. In October, governor Bill Lee, who opposed the bill, finally named his 3 nominations to the council. Given the slow implementation of the bill thus far, it is unclear as to when betting will actually be allowed to take place within the state. Estimates put the date anywhere from as soon as November 2019 to as late as March 2020. 

Beyond the logistics of the legislation, there are still major practical obstacles that Tennessee gamblers face. The bill imposes a comparatively high “luxury tax” on sports gambling winnings that exceeds 20%–this is before federal taxes are even considered. Studies suggest that tax rates on gamblers that exceed 15% risk encouraging illegal gambling. For many gamblers in Tennessee, this means that illegal sports gambling will still be the preferred option to legal sports gambling. Additionally, due to various federal, state, and private taxes and fees, the costs for sports gambling websites to even operate in Tennessee will be exorbitantly high, with an estimated 27 cents on every dollar of revenue being paid in taxes and fees. These costs, coupled with upfront infrastructure fees and labor costs, suggest that it will be difficult for sports gambling operators to maintain a presence in Tennessee for a prolonged period. Tennessee gamblers may find a lack of operators willing to take bets in the state. 

Even after legislation nominally legalizing online sports betting in Tennessee, it may yet be a long time before Tennesseans are able to place bets online consistently through legal streams.