USA vs Tennessee: Sports Betting Online

USA vs Tennessee: Sports Betting Online

Quick Reference

Tennessee is the only major U.S. market with a fully online sports betting model: no land-based sportsbooks, access through in-state mobile apps and web platforms. Oversight is provided by the independent Sports Wagering Council (SWC). Online casinos and poker are not allowed.

Legal Framework

The state's basic sports betting law enshrines the mobile-only format, licensing, reporting, advertising, and Responsible Gaming requirements.
Regulator - SWC: accepts and updates rules, conducts suitability checks, approves technology/payment/geolocation providers, controls marketing and conducts disciplinary cases.
Fantasy contests are regulated separately and are not part of the sports betting regime (it is important for operators to distinguish between products and messages).

SWC Roles and Structure

Licensing & Investigations - licenses of operators and suppliers, background checks of beneficiaries/officers/key employees.
Compliance & Enforcement - audit of reporting and taxes, line/limit/house rules monitoring, investigations and sanctions.
Technology & Lab - approval of platforms (coefficients/risk, wallets, CUS/geolocation, anti-fraud), version and hash control, logging requirements.
Responsible Gaming - self-exclusion, player assistance, advertising and product communication requirements.

Tolerance perimeter and licensing

Operators (B2C)

Sports Wagering Operator (Online/Mobile): The right to take statewide bets via app/web; house rules, limits, reporting, geolocation and KYC are required.

Suppliers/Contractors (B2B)

Managed Trading/ODDS Provider (lines/risk management),

Geo/KYC/AML/Payment gateways/Wallets,

Marketing/Affiliates (where tolerance levels are provided),

to be registered/licensed based on role and access to critical systems/data.

Personnel

Key Employee/Primary Vendor Personnel - personal suitability when accessing line management, transactions, keys/secrets or financial reporting.

Suitability: transparency of beneficiaries and sources of funds, competence and reputation of management, sustainable RG/AML/security processes.

Taxes, fees and reporting

Tax base: handle-tax - a fixed percentage of the turnover of rates (handle). Promo loans and freebets do not reduce the tax base (important for promo planning).
Fees: significant one-time (license) and annual payments for operators; mandatory contributions for suppliers.
Reporting: monthly forms for handle, amount of winnings paid, promo/bonuses (for operational control), complaints/incidents; prompt notifications on major failures/security.

Restrictions, Responsible Gaming and Marketing

Age: 21 +.
College sports: No individual prop betting on college players; NCAA team markets are allowed unless otherwise specified.
Self-exclusion: full-time program; self-excluded users are blocked from registering/playing/marketing.
Advertising: prohibition of "misleading" statements (e.g. "no risk"), mandatory RG disclaimers, prohibition of targeting of minors and self-excluded; visibility requirements for promo rules and stamps.

Technical standards and internal controls

Geolocation: SDK + network signatures/devices, anti-spoofing, fault/blocking log, regular geo-incident reports.
KYC/AML: verification of identity and age, sanctions/PEP filters, monitoring of payments and sources of funds, SAR/incident reports.
Platform/wallet/payments: immutable logs (tamper-evident), key/secret management, transaction accounting, chargeback- and bonus-abuse monitoring.
Trading/lines: house rules (lines/limits/cancellations/settlements), log of trading actions and changes in ratios; integration monitoring (suspicious patterns, alerts, interaction with data providers/leagues).
Dev→Prod: version and signature control, SBOM, role access, release/rollback processes, regular pentest and tabletop exercises; DR/BCP plans.

Market and Operating Model

Online/mobile only: launch requires local legal entity/market access, approved geo/CCP/payment providers and approved house rules.
Promo policy: Given the handle tax, promo only affects P&L, not tax - the ROI of bonuses and boosts must be tightly controlled.
Limit risks: due to the mobile-only model, proactive limits, velocity control and behavioral alerts are critical (especially for live).

Licensing Process: Reference Roadmap

1. 0-1 months - pre-filing: ownership and financing map, choice of providers (geo/CUS/payments/risk), drafts of house rules and RG/AML policies.
2. 1-3 months - submission of suitability packages for the company/beneficiaries/key personnel; tech packets (architecture, logs, keys, SBOM), DR/BCP plans and incident procedures.
3. 3-6 months - platform integration and certification, geo/CUS validation, pilots, reporting setup (handle, win, promo, complaints), trading and CS training.
4. 6 + months - conditional approvals and staged go-live, post-audit of MICS/logs, fine-tuning limits/promo and integration filters.

💡 Real terms depend on ownership structure, maturity of the technical stack and readiness of partners.

Operational checklists

Operator (B2C)

House rules: limits, cancellations, settlements; public version and change history.
Geolocation/anti-spoofing; failure log and geo-incident reports.
KYC/AML: 21 + verification, sanctions/PEP, transaction monitoring, SAR procedures.
Promo: Budgets/Cappings, Anti-Bonus Abuse, Post-Campaign Analyst.
Tax/reporting: correct accounting handle, timely payment and reconcile with payment reports.
RG: self-exclusion, deposit/time/loss limits, visible warnings, staff training.

Vendor/Platform

Geo/CCM certificates/approvals/wallets/payments; key/secret management.
Signed builds, tamper-evident logs, version control; feedback plan.
SLA/observability (uptime/latency/error metrics), vulnerabilities/patches, DR/BCP.

Trading/risk

Log of changes in market ratios, limits and suspensions.
Integration alerts (in-play and prematch), escalation procedures.
Directory of permitted markets (no individual props per NCAA players), exposure control.

Frequent risks and red flags

Opaque ownership/debt structure; side-agreements affecting control.
Poor geo-hygiene (VPN/emulators), insufficient device fingerprinting.
Incomplete/changeable logs, Dev→Prod violations.
Aggressive promos for handle tax → margin leakage without tax benefit.
Violations of advertising requirements and communication to self-excluded/younger than 21.

Economics and P&L: accents

The handle tax shifts focus from tax optimization to strict margin discipline (limits, trading, promotional ROI).
The promo budget should take into account that bonuses do not reduce the tax - hence the priority on point offers and retention of the "quality" of traffic.
Transaction costs: geo/KUS-SDK, integration providers, SIEM/logging, penetration tests and personnel training are a mandatory part of the unit economy.

Trends 2025

Tightening requirements for cashless/wallets and transaction traceability (AML triggers, anomalies, chargeback control).
More attention to supply-chain security: signed releases, SBOM, vulnerability management.
Clarification of standards for advertising and responsible marketing, including for affiliates and cross-promo with fantasy.
Enhancement of integrite monitoring (in-play signals, coordination with leagues/data).

What's important to remember

Tennessee is a pure online sports marketplace overseen by SWC; iGaming and ground sports books are not allowed.
Tax - on handle, not win: promo loans do not reduce the tax base → strict promo discipline is needed.
Critical: flawless geo/KYC/AML, immutable logs, integrites, correct house rules and responsibility in advertising/RG.