Amends TCA Title 4; Title 39, Chapter 17 and Title 47.

This bill makes technical clarifications and the following substantive changes and additions to present law concerning sports wagering: (1) This bill renames the sports wagering advisory council as the sports wagering council; (2) Present law requires persons who accept wagers from bettors on sporting events to be licensed by the sports wagering advisory council. For purposes of the regulation of sports wagering, present law generally defines "vendor" to mean a person who contracts with the council or a licensee to facilitate the council's or licensee's business. A vendor is not subject to the licensure requirement but any principal owner, partner, member of the board of directors, officer, or supervisory employee of a vendor is prohibited from wagering or betting on a sporting event in Tennessee. This bill redefines "vendor" to mean a person who provides or performs certain technical service, which are listed in the full text of this bill, or receives payment or compensation based on a revenue sharing agreement in which the vendor receives a percentage of the licensee's adjusted gross income of a licensee. This bill specifies that marketing affiliates who are compensated by a method other than a revenue sharing agreement are not vendors. This bill requires vendors to register with the commission and makes the Tennessee Sports Gaming Act applicable to vendors. The full text of this bill specifies the application requirements for a vendor registration, which include a criminal background check of the applicant's key personnel (described in (5)). A vendor registration will be valid for three years and may be renewed; (3) Present law prohibits a member, officer, or employee of the council from wagering or betting on a sporting event in Tennessee. This bill adds an exception to authorize a council employee to place a nominal wager as part of an investigation or audit on behalf of the council. Winnings paid to a council employee based on a winning wager as part of an investigation or audit must be separately accounted for by the council and returned to the operator on a quarterly basis; (4) Present law requires the council to maintain a confidential registry of persons and categories of persons who are ineligible to place a wager in Tennessee and provide the registry and updates to all licensees. Present law requires licensees to maintain the registry provided by the council confidentially. This bill replaces the confidential registry with a requirement that the council post on its website the categories of persons who are ineligible to place a wager in Tennessee; (5) Under present law, one of the items that must be included in an application for licensure is the identification of the applicant's principal owners who own 5 percent or more of the company, partners, members of its board of directors, and officers. This bill instead requires that an application for licensure or registration include the identification of the applicant's key personnel. Additionally, this bill changes the requirement for updating information concerning officers and major stockholders to instead require updating changes in key personnel. This bill defines "key personnel" to mean individuals who have the power to exercise significant influence over sports wagering in Tennessee and who are associated with the applicant for licensure or registration as: (A) A principal owner of more than 5 percent of the applicant; (B) A partner of the applicant, voting member on the board of directors of the applicant, or an officer of the applicant; or (C) An employee of the applicant who principally oversees wagering activity, risk management, platform management, or integrity monitoring; (6) Under present law, another item that must be included in an application for licensure is information, documentation, and assurances as may be required to establish by clear and convincing evidence the applicant's good character, honesty, and integrity. This bill removes a non-exclusive list of items that may suffice to meet such application requirement and specifies that the requirement applies for an applicant's key personnel; (7) Under present law, another item that must be included in an application for licensure is notice and a description of civil judgments obtained against the applicant pertaining to antitrust or security regulation laws of the federal government, of Tennessee or of any other state, jurisdiction, province, or country. This bill instead requires that an application for licensure or registration include notice and a description of all civil judgments obtained against the applicant or its key personnel; (8) This bill deletes the present law requirement that an application for licensure include letters of reference from law enforcement agencies having jurisdiction in the applicant's place of residence and principal place of business; (9) If an applicant for licensure has conducted gaming operations in a jurisdiction which permits such activity, present law requires that the application for licensure also include letters of reference from the regulatory body that regulates sports wagering that specify the standing of the applicant with the regulatory body. This bill instead requires that an application for licensure or registration include a list of all jurisdictions where the applicant and its key personnel have conducted gaming or sports wagering operations; (10) If an applicant has not previously been engaged in business operations prior to applying for licensure, this bill requires the applicant to submit, as part of the application, documents that establish, by clear and convincing evidence, that the applicant has made sufficient arrangements to fund its proposed sports wagering operations; (11) Under present law, the application fee is $50,000 and the annual licensing fee is $750,000. Present law requires that the fees collected from licensees are used by the council to pay its actual operating and administrative expenses and any remaining license and application fees collected by the council must be distributed to the state treasurer for deposit into the Tennessee Promise scholarship endowment fund. This bill adds that 10 percent of all remaining fees must not be distributed to the treasurer, but must remain available for use by the council for the purposes set forth herein and must carry forward into each subsequent fiscal year; (12) Present law lists seven categories of persons who are prohibited from applying for a license. This bill instead prohibits the council from licensing or registering an applicant that has key personnel who are within one of the seven categories. This bill also combines three of the seven categories into one new category, which prohibits licensing or registration for an employee of, coach of, player for, or person who is a member or employee of a governing body of, a sports team, league, or association, upon which wagers are permitted to be placed; (13) Present law authorizes a licensee, professional sports team, league, or association, or institution of higher education to submit a written request to the council to prohibit a type or form of wagering. This bill extends such authorization to nonprofessional sports teams; (14) Present law requires that fines assessed against licensees are accounted for separately for use by the council in a manner consistent with rules of the council. This bill adds that, at the end of a fiscal year, funds still available from fines must remain available for use by the council in a manner consistent with rules of the council and be carried forward into each subsequent fiscal year; (15) Present law requires the council to conduct certain compliance investigations. This bill makes the conduct of the investigations permissive and adds that, in the case of licensees, the council may also conduct compliance audits; (16) Present law generally extends state immunity to the Tennessee education lottery corporation. Such immunity applies to activities of the corporation relating to sports wagering under the Tennessee Sports Gaming Act. This bill deletes the extension of the corporation's activities relating to the Tennessee Sports Gaming Act; (17) This bill adds definitions to the Tennessee Sports Gaming Act for the terms "cancelled wager", "obvious error", "resettled wager" and "voided wager", although it does not appear that those terms are used elsewhere in this bill or in the present law version of the Act; and (18) Present law defines "wager" or "bet" to mean a sum of money that is risked by a bettor on the unknown outcome of one or more sporting events, including, but not limited to, the form of fixed-odds betting, a future bet, live betting, a money line bet, pari-mutuel betting, parlay bet, pools, proposition bet, spread bet, or in any other form or manner as authorized by rule promulgated by the council. Present law defines "money line" to mean the fixed odds in relation to a dollar amount that a team or person participating in a sporting event will win outright, regardless of the spread. This bill replaces the definition of "money line" with a definition of "money line wager", which this bill defines to mean a wager on the outcome of a sporting event outright, with fixed odds in relation to the dollar amount wagered. ON APRIL 13, 2023, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 475, AS AMENDED. AMENDMENT #1 makes the following changes to this bill: (1) Clarifies that "gross handle" means the total amount of gross wagers less cancelled or voided wagers received by the licensee over a specified period of time; (2) Clarifies that "gross wager" means all cash and promotional wagers received by licensees from bettors as wagers; and includes all wagers placed with cash, cash equivalents, promotional items, and all other media by which a bettor is allowed to place a wager; (3) Clarifies that "promotional payout" means a payout by a licensee to a bettor in a form that cannot be immediately withdrawn by the bettor as cash; (4) Clarifies that "promotional wager" means a wager placed by a licensee using a bonus or other non-cash item; (5) Provides that a licensee must only pay a privilege tax on its gross handle of 2 percent, instead of a privilege tax on its adjusted gross income of 20 percent; (6) Provides that the tax imposed must be paid monthly by a licensee based on its gross handle for the immediately preceding calendar month, in accordance with rules promulgated by the council. A licensee may deduct from its gross handle the amount of federal excise tax paid each month, in accordance with rules promulgated by the council. A licensee must not deduct from the gross handle winning payouts to bettors or promotional wagers or payouts. The council must promulgate rules to specify the method by which a licensee must account for adjustments to the gross handle for wagers that are cancelled or voided and repeal all rules related to the privilege tax on adjusted gross income; (7) Provides that the council may competitively procure the services of an outside contractor, instead of a vendor, to provide a central accounting and reporting system, to ascertain all bets wagered minus the total amount paid out to winning bettors daily, and such other information as the council may require; (8) Removes present law that requires a licensee to exclusively use official league data for purposes of live betting unless the licensee can demonstrate to the council that the governing body of a sport or sports league, organization, or association or other authorized entity cannot provide a feed of official league data for live betting in accordance with commercially reasonable terms, as determined by the council; and (9) Removes present law that requires each licensee to report to the council, no later than January 15 of each year, the total amount of wagers received from bettors for the immediately preceding calendar year; the adjusted gross income of the licensee for the immediately preceding calendar year; and any additional information required by rule of the council deemed in the public interest or necessary to maintain the integrity of sports wagering in this state. ON APRIL 21, 2023, THE HOUSE SUBSTITUTED SENATE BILL 475 FOR HOUSE BILL 1362, ADOPTED AMENDMENTS # 1 AND 2, AND PASSED SENATE BILL 475, AS AMENDED. AMENDMENT #1 incorporates the provisions of Senate Amendment #1 with the following changes and additions: (1) Replaces this bill's requirement that an applicant to register or renew a registration as a vendor reimburse the council for a background investigation fee charged by a third party. This amendment instead requires an applicant for registration as a vendor to pay a registration fee of $150,000 for the first three-year period of registration, if the registration is approved, and an amount set by rule for a second or subsequent period of registration; (2) Reduces the privilege tax upon a licensee's gross handle from two percent to 1.85 percent; and (3) Increases the present law application and license fees for a license to accept wagers from bettors on sporting events from a $50,000 nonrefundable application fee and a $750,000 annual licensing fee to an initial license fee to process the application and for the first year of licensure, if the application is approved, of $750,000 and a three tiered license fee ranging from $250,000 to $750,000 (based on the licensee's total wagers) for a second or subsequent year of licensure. AMENDMENT #2 makes the following changes: (1) Replaces the fee to register or renew a registration as a vendor. This amendment requires an applicant for registration as a vendor to pay a registration fee of $150,000 for the first three-year period of registration ($50,000 due at registration, $50,000 due on the first anniversary of registration, and $50,000 due on the second anniversary of registration), and an amount set by rule of the council for a second or subsequent period of registration; and (2) Increases the present law application and license fees for a license to accept wagers from bettors on sporting events from a $50,000 nonrefundable application fee and a $750,000 annual licensing fee to an initial license fee to a nonrefundable $50,000 application fee (which will be applied towards a $750,000 license fee for the initial year of licensure, if a license is issued) and (prior to June 30, 2025) a two-tiered license fee ranging from $375,000 to $750,000 (based on the licensee's total wagers) for a second or subsequent year of licensure. This amendment required the council to promulgate license fees by rule in amounts sufficient to defray the cost of regulating sports wagering this this state by July 1, 2025.