Sports betting in Tennessee goes live today after more than a year of waiting on one of the country’s most intriguing experiments.
What TN sports betting becomes remains just about anyone’s guess. It stands alone in ways likely good and bad, and will provide a juicy data point for the US market.
Here are three reasons to believe sports betting in Tennessee presents the most interesting case study east of Colorado:
1) Tennessee is the nation’s first online-only state
Legal sports betting in Tennessee can only take place via mobile devices. The Volunteer State became the first market in US sports betting to adopt the online-only model.
The success of the model will require watching over time because of the lack of TN sportsbooks at launch. Mobile TN sports betting will be limited to just four apps at the start:
Mobile sports betting is the most popular method of wagering throughout the United States. More than 90% of sports bets in New Jersey and Pennsylvania regularly take place via smartphone apps.
Retail still has a place
The retail customer acquisition channel, though, remains integrated into the strategy of many sportsbooks, notably William Hill. Traditional casino companies cannot rely on existing customer databases to market sports betting in Tennessee.
That could provide an edge to US market leaders FanDuel and DraftKings, both of whom built their lists through DFS contests in the state. It also could drive value for in-stadium activations, as well as pop-ups at bars and restaurants.
2) The TN minimum hold rule is a wild card
The Tennessee Lottery oversees sports betting in TN and insisted on a lottery-style 10% minimum hold for all operators. In short, the state guarantees taxable revenue across operators has a floor each month.
How sports betting in Tennessee reaches that threshold remains an open question. Experts suggest pricing could suffer in betting markets where juice can hide, such as
Comparing to the past of sports betting
Historical hold in Nevada, the grandfather of US markets, checks in at 5.4% over the state’s track record. The traditional business relies on high betting volume because of the volatility of returns year to year.
Sportsbooks could struggle to reach the 10% threshold without worsening their product. In turn, that could hinder the ability of the legal market in Tennessee to compete with illegal offshore websites and bookies.
The minimum hold rule is a first in the US market that likely should become a last. Setting an arbitrary amount to retain in a notoriously low-margin business artificially restricts businesses already motivated to return maximum revenue to Tennessee.
3) The unique geography of sports betting in Tennessee
The South remains largely untapped in terms of sports betting potential. The country’s most ravenous college football fans today gain their first legal option to bet via mobile.
Mississippi and Arkansas feature in-person sports betting without providing mobile apps. Legislators in Mississippi twice attempted unsuccessfully to change their laws to include mobile.
Sports betting in Tennessee can become a geographical hub for the mobile wagering in the South. Of neighboring states, only Virginia will have mobile betting when it launches early next year. And Virginia does not geek out on Saturday football like Tennessee does.
If Tennessee succeeds in popularizing mobile sports betting, other Southern states could become less reticent to legalize in coming years.