(The Center Square) – Tennessee’s Sports Wagering Advisory Council decided to delay punishments for nine operators that didn’t meet a 10% profit mark last year while it approved Fanatics Sportsbook to begin operations at its Wednesday meeting.
SWAC Executive Director Mary Beth Thomas explained she had proposed fines and “true-up payments” for the nine operators at the board’s Feb. 6 meeting but, after board feedback, SWAC is instead working with the Tennessee Legislature to change the state’s law to fix the issue.
The 10% operator hold agreement is a form of guarantee the state is receiving a set amount of tax money from sports gaming, which is taxed 20% on its adjusted gross income.
In 2022, the state collected $68 million in taxes on nearly $3.9 billion in wagers. If all of the operators had met the 10% requirement, Tennessee would have collected $11.6 million more and, over a two-year span, that total in lost taxes was $22.5 million as operators didn’t meet the requirement.
“Your message overall was simple, that we cannot be in this situation again next year,” Thomas told the SWAC board.
Thomas noted she has met with representatives from the sports gaming industry and operators and has been given “appropriate assurances” the industry will negotiate a legislative fix to the issue. She suggested the operator punishment be delayed until after the legislative session ends in May.
“I think (the operators) realize that this situation is not workable moving forward,” Thomas said.
Thomas said Tennessee Lieutenant Gov. Randy McNally’s office is preparing an amendment to the SWAC’s “clean-up bill” that will change the tax structure. She noted she doesn’t know the form of the change yet.
Senate Bill 545 on the state’s Sports Gaming Act is currently referred to the Senate State and Local Government Committee without a date to be heard while its companion bill, House Bill 110, states it is awaiting an amendment.
The SWAC approved a license for Fanatics Sportsbook to become the state’s 13 operatic and Fanatics Betting and Gaming's Vice President of Regulatory Affairs Alex Smith said that Fanatics would be ready to open operations "very, very shortly after this meeting." The board also renewed a license for Bally Bet, which has not begun operations in the state despite being approved a year earlier for a license.
The board did levy two fines to operators. Barstool Sportsbook was fined $92,000 for allowing live prop bets on college football between Sept. 22 and Nov. 19, which it self-reported. The prop bets, not allowed on college sports in Tennessee’s legislation, led to 184 in-game wagers worth $12,957 in the state. Barstool gave refunds to any bettor who lost money on the wagers while those who won kept their winnings on items like scores in an individual quarter of a game.
Seminole Hard Rock Casino, meanwhile, was fined $70,000 for multiple violations found by a tester. The operators geolocation failed on its desktop application while the sportsbook also accepted a total of six credit-card deposits into five different accounts, something also outlawed in the state law.
“We’ve tried to stop people from using credit cards,” SWAC member John Valliant noted, saying credit-card deposits can lead to life-changing debt for bettors.
Valliant asked about raising the fine for Seminole Hard Rock but the $70,000 fine was ultimately approved.
“I hope we don’t vilify the operators,” SWAC board member Michael Keeney said, noting that it is a new industry which opened in November 2020 in Tennessee and “mistakes will happen.”