Tennessee Passes America’s First Online-Only Sports Betting Bill

While he declined to join three other Governors (Montana, Indiana, Iowa) who signed legislation earlier this month, Bill Lee of Tennessee did allow the Volunteer State to legalize online sports betting.

Senate Bill 16 was sent to Lee’s desk back on April 30th, and after nearly a month of deliberation, the Governor declined to either sign or veto the measure. Instead, Lee ultimately allowed the nation’s first online-only sports betting bill to become law without his signature.

Lee signaled his intention to let SB-16 move forward absent his endorsement earlier this month.

In a tweet issued on May 24th, Lee offered the following statement to explain his decision:

“I do not believe the expansion of gambling through online sports betting is in the best interest of our state, but I appreciate the General Assembly’s efforts to remove brick and mortar establishments.

This bill ultimately did not pursue casinos, the most harmful form of gambling, which I believe prey on poverty and encourage criminal activity.

Compromise is a central part of governing, but I remain philosophically opposed to gambling and will not be lending my signature to support this cause.”

The recent sports regulation gold rush began on May 3rd when the Governor of Montana signed his state’s sports betting bill. The first sports betting approval of 2019 was quickly followed by gubernatorial signatures in Indiana and Iowa over the next 10 days.

As one of only nine American states with no commercial or tribal casinos to speak of – along with Georgia, Hawaii, Kentucky, New Hampshire, South Carolina, Utah, Vermont, and Virginia – Tennessee’s path towards regulated sports wagering was torturous at times.

Stiff Opposition Leads to Several Curious Amendments

During contentious debates within the General Assembly, lawmakers variously raised objections over sportsbooks operating on Sundays, bettors profiting from collegiate sports, and even gambling addiction as a form of modern-day “slavery.”

The most oft-cited concern, however, was the bill’s original call for the creation of up to 50 land-based retail sports betting locations across the historically gambling-averse state.

In the wake of intense debate, the 99-seat state House of Representatives – which requires 50 votes to pass legislation – approved SB-16 in a 51 to 40 that only cleared the required threshold by a single vote.

The margin wasn’t as slim in the state Senate where members voted 19 to 12 in favor, but only after adding a controversial amendment to allow professional leagues input on which wager types will be offered.

Those squabbles resulted in a sports betting law that only permits betting through a licensed online/mobile bookmaker, making Tennessee’s new law utterly unique within the country’s post-PASPA era of statewide regulation.

Since the U.S. Supreme Court ruled to repeal the Professional and Amateur Sports Protection Act (PASPA) of 1992 last May, all seven states which have launched legal sportsbooks have done so with land-based bet shops forming the foundation from which online/mobile operators do business.

But as Lee made quite clear in his comments after letting SB-16 become law, any allowance for brick and mortar sportsbooks – additions the Governor believes would pave the way for full-scale casino gambling down the road – would have been a nonstarter:

“We see this issue differently but let me be clear: any future efforts to expand gambling or introduce casinos in Tennessee will assure my veto.”

State Eyeing Eight-Figure Annual Revenue Haul

State senator Steve Dickerson (R-20) and State Representative Rick Staples (D-15) introduced SB-16 in January.

At the time, Staples framed online/mobile regulation as the most effective way to monetize existing activity by Tennesseans who already place wagers with offshore sportsbooks:

“(It will) bring the illegal online sports gambling market into the sunshine.

We already have billions of dollars that leave the state, going to other states that have casino gambling, so here’s a chance to do in-state sports betting that would capture dollars.”

Under provisions set forth by SB-16, the Tennessee Lottery can begin overseeing legal sports betting on July 1st of this year.

Prospective operators will pay a licensing fee of $750,000 and taxes of 20 percent annually on gross gaming revenue. Using that setup, lawmakers have estimated sports betting will generate $50 million in annual revenues once the market has fully matured.

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