Tenn. Comp. R. & Regs. 1350-01-.05 - APPLICATION PROCESS

(1) An application for any type of License or Registration under these Rules shall be on forms issued by the Council and available on the Council's website, in accordance with requirements of the Sports Gaming Act.

(2) The application for a Sports Gaming Operator License or Registration as a Vendor shall, at a minimum, include the following:

(a) The Applicant's legal name, including any DBA, if applicable, and form of business entity;

(b) The mailing address of the Applicant and, if a business entity, its state of formation, and the location of its principal place of business;

(c) The names, addresses, taxpayer identification numbers, and dates of birth of each Key Personnel of the Applicant, along with three years of income tax returns for same;

(d) The names, addresses, and employer identification numbers, as applicable, of each individual, group of individuals, trust or business entity associated with an Applicant, including, but not limited to, a holding company, parent company, or subsidiary company of the Applicant that has the ability to control the activities of the Applicant or elect a majority of the board of directors or select the manager or general partner of the Applicant (excluding any bank or other licensed lending institution that holds a mortgage or other lien acquired in the ordinary course of business);

(e) The names, addresses, and employer identification numbers, as applicable, of each individual, group of individuals, trust, or entity associated with an Applicant that directly or indirectly holds a five percent (5%) or greater beneficial or proprietary interest in the Applicant's business operation, or that the Council otherwise determines has the ability to control the Applicant;

(f) For Sports Gaming Operator License Applicants, information, documentation, and assurances as may be required by form to establish by clear and convincing evidence that the Applicant has sufficient business ability and sports gaming experience to create and maintain a successful, efficient Interactive Sports Gaming operation. Sports Gaming Licensure Applicants shall submit an audit of the financial statements and condition of the Licensee's Interactive Sports Gaming operations in the State of Tennessee prepared within the preceding twelve-month period by a Certified Public Accountant in accordance with generally accepted accounting principles and applicable state and federal law, if available. If an Applicant has audited financial statements prepared at the parent company level, the Applicant shall include with its audited consolidated financial statements a supplemental schedule (either audited or unaudited) of the Licensee Applicant's Interactive Sports Gaming operations in Tennessee or an attestation from the Licensee Applicant's Certified Public Accountant that the Applicant has implemented procedures to accurately report all financial data necessary to determine privilege taxes owed by the Applicant from Interactive Sports Gaming operations in Tennessee. If an Applicant has not previously been engaged in business operations prior to applying for licensure, the Applicant shall submit documents that establish, by clear and convincing evidence, that the Applicant has made sufficient arrangements to fund its proposed sports Wagering operations.

(g) For Registrant Applicants, financial statements of the Registrant Applicant's financial condition prepared within the preceding twelve-month period in accordance with generally accepted accounting principles and applicable state and federal law. A Registrant Applicant may provide financial statements prepared at the parent company level.

(h) For Sports Gaming Operator License Applicants, a description of the proposed internal controls and security systems to be used in conducting sports wagering or processing sports wagering transactions, as may be applicable;

(i) The number of employees expected to be employed by the Licensee or Registrant in the State of Tennessee;

(j) For Sports Gaming Operator License Applicants, the estimated privilege tax revenue to be generated by the Sports Gaming Operator for the first three (3) years of operation;

(k) The estimated economic benefit to the State of Tennessee of the proposed License or Registration. The estimate may include, but not be limited to, the following: projected amount of annualized gross revenue; estimated new capital investment for the project; scientific or market research performed by the Applicant or its contractors; and such other information as may be requested by the Council;

(l) A copy of the Applicant's certificate of good standing and authorization to conduct business in the state of Tennessee;

(m) A list of jurisdictions where the Applicant has (i) applied for a sports wagering or gaming license; (ii) been issued a sports wagering or gaming license; (iii) been the subject of a law enforcement or government subpoena, cease and desist letter, attorney general or government legal opinion, or other correspondence regarding any non-routine law enforcement or government investigation concerning conduct related to gambling operations (including casino gaming, horse racing, dog racing, pari-mutuel, lottery, sports betting, daily fantasy sports, etc.) in any jurisdiction; or (iv) had any sports wagering or gaming license denied, suspended, or revoked, and the status and copies of such documents relating to (iii) or (iv);

(n) A list of all jurisdictions where the Applicant and its Key Personnel have conducted gaming or sports Wagering operations or provided services to a Sports Gaming Operator conducting gaming or sports Wagering operations.

(o) Notice and a description of civil judgments obtained against the Applicant and any Key Personnel thereof, pursuant to the laws of the federal government, of the State of Tennessee or of any other state, jurisdiction, province, or country;

(p) Description of any bankruptcy, insolvency, or liquidation actions filed by or against the Applicant, any Key Personnel thereof;

(q) The Council will compile a national or, as applicable, international criminal history and background report on the Sports Gaming Operator License Applicant, Vendor Registrant, and Key Personnel thereof, including fingerprint submittals by individuals described in this subparagraph, conducted by the TBI, other U.S. or international law enforcement agency, Council staff, or other private security firm under contract to the Council. Said report shall include review of whether the Sports Gaming Operator License Applicant and Vendor Registrant, or any individual described in this subparagraph, has engaged in gaming activity in any jurisdiction in which such activity is illegal; and

(r) Any other information the Council considers necessary and appropriate to determine by clear and convincing evidence the competency, law abiding nature, suitability, honesty and integrity of Applicant.

(3) As required by the Sports Gaming Act, each Sports Gaming Operator License Applicant shall submit ancillary documentation necessary for the Council to assess fully the Applicant's operations and compliance with the Sports Gaming Act. Each Sports Gaming Operator License Applicant shall submit with its application, made under oath, the following:

(a) Applicant's plan to provide data files, in a format and timeline approved by the Council, to the Council to confirm Applicant's calculation of the privilege tax to be paid each month.

(b) Applicant's most recent Sports Gaming System Operational Assessment.

(c) Applicant's most recent Sports Gaming System Technology Integrity and Security Assessment.

(d) Applicant's Internal Control Standards as required by Chapter 1350-03 of these Rules that specify and describe the following:

1. Requirements for internal audits in accordance with Rule 1350-03-.04(2)(c).

2. User access controls for all Interactive Sports Gaming personnel in accordance with Rule 1350-03-.03.

3. Segregation of duties among all Interactive Sports Gaming personnel in accordance with Rule 1350-03-.04.

4. Automated and manual risk management procedures in accordance with Rule 1350-03-.05, including the following:

(i) Sources of data and information feeds and services, including, but not limited to, official data, odds and line monitoring services,

(ii) Integrity Monitoring Systems, and

(iii) Risk management support.

5. Procedures for identifying and preventing Prohibited Participants from engaging in Interactive Sports Gaming in accordance with Rule 1350-03-.07.

6. Procedures for identifying and preventing Wagers and Payouts to Minors in accordance with Rule 1350-03-.11.

7. Procedures for identifying and reporting fraud, Cheating, and Suspicious or Unusual Wagering Activity in accordance with Rule 1350-03-.06, including:

(i) A monitoring system utilizing software to identify irregularities in volume or odds and swings that could signal Suspicious Wagering Activities that should require further investigation;

(ii) Procedures for addressing Suspicious Wagers over any threshold set by the Licensee; and

(iii) A description of the method to prevent past posting (i.e., a Wager made outside of the Wager period).

8. A description of AML compliance standards in accordance with Rule 1350-03-.08, including a description of the following:

(i) Controls for payouts of $10,000 or more;

(ii) The process of identifying the structuring of multiple Wagers within a 24hour period in order to circumvent reporting and recording requirements; and

(iii) The process for creating a log of Wagers of $5,000 or more.

9. A description of all types of Wagers available to be offered by the Sports Gaming System pursuant to Rule 1350-03-.09.

10. A description of all integrated third-party systems in accordance with Rule 1350-03-.10.

11. A description of Information System Minimum Controls in accordance with Rule 1350-03-.12, including:

(i) The safeguarding of Sports Gaming Accounts, including maintaining the security of identity and financial information of Players; and

(ii) A description of all hardware and software applications that comprise the Sports Gaming System; and

12. Controls ensuring regulatory compliance with the Sports Gaming Act and these Rules.

(e) Applicant's Responsible Gaming Plan, including Applicant's methodology and process for permitting individuals to exclude themselves from being able to place Wagers; maintenance of the Sports Gaming Operator's self-exclusion list; and preventing the placing of Wagers by individuals on the Sports Gaming Operator's self-exclusion list and the ineligibility list prepared by the Council.

(f) Applicant's plan and policy governing the acceptance of Wagers and making payouts (i.e., House Rules), which must be approved by the Council.

(g) Procedures for issuance and acceptance of Promotional Credit for sports wagering.

(h) Applicant's customer service phone number and e-mail address for responding to public and Patron inquiries and questions originating from the State of Tennessee or relating to sports gaming operations in the State of Tennessee. Once Applicant receives its License, the Council shall post the Licensee's customer service phone number and email address on its website.

(i) A list of Key Personnel for the State of Tennessee, specifically. The list must include the name, home address, date of birth, work location, title, and summary of duties and responsibilities.

(j) A description of Applicant's expected use of Geolocation Services to prevent Wagers from outside the State of Tennessee.

(k) The method by which the Sports Gaming Operator will identify and cancel Wagers, including defining "Obvious Error."

(l) A diagram illustrating the process flow and supporting documentation regarding the affiliation between Applicant and its Vendors and other providers.

(m) The Applicant's "Terms and Conditions" for sports wagering in Tennessee.

(n) The Applicant's method for deploying changes and updates to the Sports Gaming System, or Internal Control Standards, including notification to the Council.

(4) An Applicant shall notify the Council in writing of any material change to its application within ten (10) business days of the change. Notwithstanding the foregoing, an Applicant shall notify the Council of all changes to its Key Personnel within three (3) business days of the change. An Applicant shall complete all Key Personnel disclosures, including a statement as to any conflict of interest that may exist due to the changes in Key Personnel, within thirty (30) days of the change.

(5) For a Sports Gaming Operator License, Applicant shall submit a nonrefundable application fee of fifty thousand dollars ($50,000) due at the time the initial or renewal application is submitted. Failure to submit the $50,000 application fee shall cause the application to be rejected or cause a delay in the processing of an application. Upon approval of the application, the $50,000 application fee shall be applied to the Sports Gaming Operator's licensing fee provided for by Rule 1350-01-.04(1)(b). The total fee shall be paid in full within ten (10) days of approval of the License or prior to expiration of the annual renewal period, which shall be one (1) year from the date of the issuance of the License.

(6) Application fees, license fees, registration fees, background or investigative fees or costs, or any other fees or costs related to an application or renewal will not be refunded if an application for a License or Registration is withdrawn after submission.

(7) Any Applicant shall complete such additional forms or provide such additional information as may be requested by the Council.

Notes

Tenn. Comp. R. & Regs. 1350-01-.05

Emergency rules filed December 22, 2021 to become effective January 1, 2022; effective through June 30, 2022. New rules filed March 22, 2022; effective June 20, 2022. Emergency rules filed June 20, 2023 to become effective July 1, 2023; effective through December 28, 2023. Amendments filed September 15, 2023; effective 12/14/2023.

Authority: T.C.A. §§ 4-49-101, 4-49-102, 4-49-106, 4-49-110, 4-49-115, 4-49-115(f), 4-49-117, 4-49-120, 4-49-125, and 4-49-131; and 2023 Tenn. Pub. Acts, Ch. 450.