According to PlayTenn analysts, Tennessee’s sportsbooks could generate $6bn in bets annually once the market reaches maturity.
Four sportsbook operators (FanDuel, DraftKings, BetMGM and local operator Action 24/7) will make their official debut in the Volunteer State on Sunday, making it the 19th state, and Washington DC, to offer some form of legal, regulated sports betting, and perhaps the most unusual market yet.
Jessica Welman, analyst for PlayTenn.com, said: “Tennessee’s sports betting industry will be purely a product of the modern movement to legalize gaming, with a regulatory framework that is unique and online operators untethered to any conventional retail casino.
“The potential for Tennessee is significant, but the state is working with a lot of variables that make it atypical among legal markets.”
Tennessee’s market is almost identical in size to Indiana, a state that has attracted $1.4bn in sports wagers in 13 months since launching, making it the fourth-largest market over that time. In October, the Hoosier State set a state record by accepting $207.5m in bets for the month.
While similar in size, though, Tennessee varies in myriad ways that could affect the growth of the sports betting industry. For one, the state’s operators are required to have a 10% hold, which is the percentage of wagers sportsbooks must keep.
No state has ever put in place such a requirement, and it is a high threshold. Historically, the hold at sportsbooks in Nevada is more like 5% to 7%.
The state’s 20% tax rate on revenue is also relatively high, which could limit operators’ interest in the Tennessee market. On the other hand, the state’s $750,000 upfront licensing fee is relatively low, which is appealing to operators.
The launch of sports betting will mark Tennessee’s introduction to gaming, other than lottery games. That too is a first and could be a benefit. Online operators will not be tethered to retail casinos and need not bother with in-person registration. And there are no state heavyweights for new operators to overcome.
Dustin Gouker, analyst for PlayTenn.com, stated: “It’s too much to say that Tennessee is the Wild West of markets, but it is far more open than we have seen. DraftKings and FanDuel will have an advantage early on, but we expect a highly competitive market that will attract a host of operators.”
To reach $6bn a year, which could generate nearly $120m in tax revenue for the state if sportsbooks can reach a 10% hold, Tennessee will have to capitalize on its love of local sports betting teams.
Like Colorado, which launched earlier this year, Tennessee is home to a robust sports culture, which includes major college teams in addition to the NFL, NBA, and NHL franchises with significant followings. Such interest has been a boon in Colorado, which edged Indiana in October with a handle of $207.7m despite having a smaller population.
Welman added: “Tennessee has a lot going for it, including being home to teams with passionate fanbases, but only time will tell to see if its regulatory gambles, especially the hold requirement, will hold the market back.”