Tenn. Comp. R. & Regs. 1350-01-.06 - APPROVAL OR DENIAL OF AN INITIAL APPLICATION

(1) In accordance with the Sports Gaming Act, T.C.A. § 4-49-120, the Council shall not grant a License or approve a Registration for an Applicant that has one or more of the following individuals associated with it as Key Personnel:

(a) Any Person identified in 1350-01-.03(13)(a);

(b) 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; or

(c) A Person having the ability to directly affect the outcome of a Sporting Event.

(2) Applicants shall not be issued a License or approved for Registration if they, or any of their Key Personnel, have been convicted of any felony. Applicants shall not be issued a License, approved for Registration if they, or their Key Personnel, have been convicted of any gambling-related offense that the Council finds threatens the integrity of sports wagering in Tennessee and the public interest.

(3) In all cases, the Council shall have sole authority to approve, condition, or deny an application for a License or Registration, or renewal thereof.

(4) In determining whether to approve or deny an application for a License or Registration the Council may consider the following factors:

(a) Whether the Applicant is proposing an Interactive Sports Gaming operation that will have a positive impact through increased revenues to the State of Tennessee.

(b) Whether the Applicant possesses adequate funds or has secured adequate financing to commence and maintain an Interactive Sports Gaming operation or serve as a Vendor.

(c) Whether the Applicant has the financial stability, integrity, and responsibility to conduct Interactive Sports Gaming, or serve as a Vendor for Interactive Sports Gaming.

(d) Whether the Applicant has sufficient business ability and experience to create and maintain a successful Interactive Sports Gaming operation or serve as a Vendor for Interactive Sports Gaming.

(e) Whether the Sports Gaming Operator License Applicant has proposed adequate measures for security of any Sports Gaming System, server, or components thereof.

(f) Whether the Sports Gaming Operator License Applicant has demonstrated that its proposed Interactive Sports Gaming operation will be conducted in accordance with the Sports Gaming Act and all other applicable local, state, and federal laws, and has satisfied the requirements set forth in these Rules.

(g) Whether the Applicant or its Key Personnel have been:

1. Convicted of a disqualifying offense, as established by the Sports Gaming Act;

2. Arrested, charged, indicted, or have received a target letter from the U.S. Department of Justice in connection with any investigation of offshore sports gaming activities that serviced the United States;

3. Arrested, charged with, convicted of, pleaded guilty to, or forfeited bail concerning any criminal offense under the laws of any jurisdiction, other than for a minor traffic offense; or

4. Indicted of any felony, gambling-related offense, or any other offense(s) that the Council finds will threaten the integrity of sports wagering in Tennessee and the public interest.

(h) The past and present compliance of the Applicant, its affiliates, or affiliated companies relating to gaming operations or activities in any other jurisdiction, including, but not limited to, whether the Applicant has a history of non-compliance with the gaming requirements or prohibitions of any jurisdiction.

(i) Whether the Applicant has knowingly made a false statement of a material fact in any application or other communication to the Council or failed to disclose to the Council a violation of this Rule by Applicant, as applicable.

(j) Whether the Applicant has had a license to operate any gaming or sports wagering activity suspended or revoked or been denied from operating any gaming or sports wagering activity by any governmental authority responsible for the regulation of gaming activities in any jurisdiction.

(k) Whether an Applicant has timely remitted the balance of any application, license, or other fees when due to the Council.

(l) Whether the Applicant has filed, or had filed against it, a proceeding for bankruptcy, liquidation, or insolvency or has ever been involved in any formal process to adjust, defer, suspend, or otherwise work out the payment of any debt.

(m) Whether the Applicant has been served with a complaint, lien, or other notice filed with any public body regarding a payment of any tax or obligation required under any law in any jurisdiction, where the Applicant has been in breach for one or more years.

(n) Whether the Applicant is or has been a defendant in litigation involving its business practices that would call into question its suitability to obtain a License or Registration.

(o) Whether the Sports Gaming Operator License Applicant has submitted a Responsible Gaming Plan that meets the Council's requirements.

(p) Whether the Sports Gaming Operator License Applicant has demonstrated that it has met the reserve requirements, including obtaining the required Bond set forth in these Rules.

(q) Whether the Sports Gaming Operator License Applicant has met the insurance requirements set forth in these Rules.

(r) Whether the Applicant has submitted financial statements in accordance with these Rules.

(s) Whether the Sports Gaming Operator License Applicant has submitted a Sports Gaming System Operational Assessment by an independent testing laboratory in accordance with these Rules.

(t) Whether the Sports Gaming Operator License Applicant has submitted a Sports Gaming System Technology Integrity and Security Assessment by an independent testing laboratory in accordance with these Rules.

(u) Whether the Sports Gaming Operator License Applicant has established the escrow account required by these Rules for the payment of privilege tax.

(v) Whether the Sports Gaming Operator License Applicant has submitted House Rules in accordance with these Rules.

(w) Whether the Sports Gaming Operator License Applicant has developed internal controls in accordance with Rule Chapter 1350-03.

(x) Whether the Sports Gaming Operator License Applicant has demonstrated that it has appropriate procedures and controls in place to meet the requirements related to Sports Gaming Accounts in accordance with these Rules.

(y) Whether awarding a License or approving a Registration would undermine the public's confidence in the Interactive Sports Gaming industry in the State of Tennessee.

(z) Whether the Sports Gaming Operator License Applicant is a member of an independent integrity monitoring association.

(aa) Whether the Applicant meets other prescribed standards for the issuance of a License or approval of a Registration, as set forth in these Rules.

(5) Completed Applications for Initial Licensure or Registration.

(a) Upon receipt of an application, the Council shall review it for completeness and submit the requisite information to the appropriate investigative individual or entity to conduct the criminal history review and report.

(b) In the event the review of the application reveals a deficiency, the Council shall notify the Applicant in writing (which may include e-mail). The Council shall have no obligation to continue to review the application until the deficiency is corrected.

(c) Upon a determination that the application is complete, the Council shall notify the Applicant in writing (which may include e-mail) that the application has been deemed complete. The Council shall approve or deny the application within ninety (90) calendar days of it declaring the application complete.

Despite this determination, the Council may continue to request additional information from Applicant. If, as a result of the investigation into the background of the Applicant or its affiliated Persons or entities, a sufficient amount of additional information is required to be provided, the Council may notify the Applicant in writing (which may include e-mail) at the time of the request for additional information that it is suspending or revoking its determination of application completeness.

(d) In the event the Council suspends its determination of completeness, such suspension shall remain in place until such time as the additional requested information is provided by Applicant. The imposition of a suspension of completeness will result in a resetting of the ninety (90) day timeframe for the Council to approve or to deny the application.

(6) Sports Gaming Operator License and Vendor Registration Applicant Background Investigations for Initial Licensure or Registration.

(a) Upon determination that the application is complete, the Council shall initiate an investigation into the backgrounds of Applicant's Key Personnel, excluding any Institutional Investors.

(b) The Council shall conduct a due diligence investigation of the Applicant to assess whether a License shall be awarded or Registration approved. The investigation will focus on integrity, background, responsibility, financial stability, criminal history, reputation, character, and ability to perform scope of services and shall require documents and information as specified on the forms available on the Council's website.

(c) Criminal history background investigations shall include the submission of fingerprints to the Tennessee Bureau of Investigation, Federal Bureau of Investigation, or any other foreign government agency, public or private, deemed to be appropriate by the Council. Applicant will be required to disclose the following information and include a description of the circumstances, dates, location, nature of violation, disposition, and status:

1. Whether the Applicant or any Key Personnel have been arrested, charged, or convicted of a criminal offense in any jurisdiction, excluding minor traffic violations, such as parking tickets, speeding, etc.;

2. Whether the Applicant or any Key Personnel have been subject to any disciplinary action or non-routine investigation by any administrative, governmental, law enforcement, or regulatory body; and

3. Whether the Applicant or any Key Personnel have been charged with a violation of any statute, rule, regulation, or ordinance of any administrative, regulatory, or other governmental body.

(d) Applicant's financial stability review shall include the following information:

1. Whether the Applicant or its Key Personnel have been in default of paying any taxes, fees, or other obligations owed to the State of Tennessee, any local governmental entity in Tennessee, or the federal government.

2. Documents evidencing the financial activities and stability of the Applicant and any Key Personnel, including bank statements, business and personal income and disbursement schedules, tax returns, or other documentation satisfactory to the Council that demonstrates by clear and convincing evidence that the Applicant has sufficient business ability and experience to establish and maintain a successful Interactive Sports Gaming operation or business; and

3. Documents evidencing the ability of the Applicant to meet ongoing operating expenses necessary for the maintenance of a continuous and stable Interactive Sports Gaming operations or business and for Licensees, the ability to pay, as and when owed, winning Wagers and all state and federal taxes.

(7) Sports Gaming System Requirements.

(a) Sports Gaming System Operational Assessment. Prior to Licensure, and annually thereafter prior to renewal, the License Applicant must demonstrate that its Sports Gaming System meets the standards set forth in these Rules. The Sports Gaming System must be reviewed, tested, and approved by a recognized independent testing laboratory that is registered as a Vendor. The independent testing laboratory's Sports Gaming System Operational Assessment must be submitted to the Council and must, at a minimum include the following:

1. The scope of review, which shall include, at a minimum, an assessment of the Sports Gaming System's compliance with Rules 1350-01-.03(4), 1350-01-.03(7), 1350-01-.06(7)(b) 1. through 7., 1350-01-.06(7)(c), 1350-01-.06(7)(d) 1. through 14., 1350-01-.06(7)(e) 1. through 6., 1350-01-.06(7)(f) 1. through 4., 1350-01-.06(7)(g) 1. through 4., 1350-01-.06(7)(i), 1350-01-.06(8)(a) through (c), 1350-01-.07(9)(d), 1350-01-.07(17)(a), 1350-01-.08(8) through (10), 1350-01-.08(19)(a), 1350-01-.08(19)(d) 2. and 3., 1350-01-.08(20)(a) through (e), 1350-01-.08(21)(a) through (d), 1350-01-.12(4)(a) 4., 1350-03-.03(3)(a) through (h), 1350-03-.11(2) and (4), 1350-03-.12(1) through (7), 1350-03-.12(9), 1350-03-.12(14)(a) through (g), 1350-03-.12(15)(a) through (d), 1350-03-.12(16)(a) through (c), 1350-03-.12(16)(e) through (h), and 1350-03-.12(19);

2. Name and company affiliation of the individuals who conducted the assessment;

3. Date of assessment;

4. Findings with regard to compliance with the Sports Gaming System requirements set forth in these Rules;

5. Recommended corrective action, if any; and

6. The Applicant's response to the findings and recommended corrective action.

(b) A Sports Gaming System must address, at a minimum, the following functions:

1. Wagering management;

2. Sports Gaming Account management;

3. Location requirements for placing Wagers;

4. Verification of all system, data, software-related components and time synchronization;

5. Reporting and security requirements;

6. Ability to report and detect abnormal betting patterns and Unusual, Suspicious, or illegal wagering activities; and

7. Preventing the acceptance of Wagers from Prohibited Participants.

(c) A Sports Gaming System shall maintain all transactional wagering data for a period of five (5) years.

(d) A Sports Gaming System shall record and store the following information for each Wager made, and be capable of transmitting it to the Council upon request:

1. Description of Event;

2. Event Number;

3. Wager selection;

4. Type of Wager;

5. Amount of Wager;

6. Date and time of Wager;

7. Unique Wager identifier(s);

8. Player identification number;

9. Current Wager status (i.e., active, cancelled, unredeemed, pending, etc.);

10. Redemption and/or Ticket expiration period, if applicable;

11. Relevant location information;

12. The results of the Wager;

13. Amount won; and

14. Date and time winning Wager was paid to Player.

(e) A Sports Gaming System that issues and/or redeems a Promotional Credit shall record the following information:

1. Amount of Promotional Credit;

2. Date, time, and method of issuance;

3. Unique Promotional Credit identifier;

4. Expiration period for the Promotional Credit;

5. Player identification number assigned to the Promotional Credit; and

6. Date, time, and method of redemption of Promotional Credit, if applicable.

(f) A Sports Gaming System that offers live betting shall be capable of the following:

1. The accurate and timely update of odds for live betting Wagers;

2. The ability to notify the Player of any change in odds that is not beneficial to the Player after a Wager is attempted;

3. The ability for the Players to confirm the Wager after notification of the odds change; and

4. The ability to freeze or suspend the offering of Wagers when necessary.

(g) When a Wager is Voided or Cancelled, the Licensee shall make an entry in the Sports Gaming System indicating the void or cancellation.

1. In the event that a Licensee voids or cancels a Wager pursuant to these Rules prior to the outcome of the Event being known, the Licensee shall report the Wagering data on a monthly basis as part of the privilege tax submission in accordance with Rule 1350-01-.07(6).

2. In the event that a Wager is placed after the outcome of the Event is known, the Licensee shall void the Wager, but must Immediately Notify the Executive Director.

3. In the event that a Licensee voids a Wager due to an indication of Suspicious Activity, the Licensee must Immediately Notify the Executive Director.

(h) A Sports Gaming System shall be capable of verifying that all components of the Sports Gaming System are the authentic, approved versions used to offer, record, and process Wagers to ensure there have been no unauthorized modifications. The Sports Gaming System must be able to detect if any system component is determined to be invalid in the event of an authentication failure.

(i) A Sports Gaming System shall have controls in place to review the accuracy and timeliness of any data feeds used to offer or settle Wagers. In the event that an incident or error occurs that results in a loss of communication with data feeds used to offer or redeem Wagers, such error shall be recorded in a log capturing the date and time of the error, the nature of the error, and a description of its impact on the system's performance. Such information shall be maintained for a minimum period of two (2) years.

(j) The Sports Gaming System shall provide the Council with access to Wagering systems, transactions, and related data as deemed necessary by the Council, in the manner required by the Council.

(k) A Sports Gaming System shall provide a mechanism for the Council to query and export all Sports Gaming System data in the manner required by the Council.

(8) Geolocation Requirements.

Prior to Licensure, an Applicant must demonstrate that it utilizes a Geolocation system that provides the following functions, at a minimum:

(a) Detects the physical location of a Player attempting to access any Sports Gaming System;

(b) Monitors and blocks unauthorized attempts to place a wager using the Sports Gaming System;

(c) Ensures that a Player is continually located within the geographical boundaries of Tennessee when the Wager is initiated and received. If the session is longer than a single Bet or Wager:

1. Rechecks the geographical location every twenty (20) minutes or five (5) minutes if within one (1) mile of the state border; and

2. Rechecks intervals based on the Player's proximity to the border with an assumed travel velocity of seventy (70) miles per hour, and a maximum interval not exceeding twenty (20) minutes; and

(d) Does not rely solely upon IP addresses to determine location when a mobile or Internet connection is being used to place a Wager.

(9) Responsible Gaming Plan.

Each License Applicant shall propose a Responsible Gaming Plan as an element of its License application. A Licensee shall maintain its plan for as long as the Licensee accepts Wagers in the State of Tennessee. A Licensee may propose amendments to its Responsible Gaming Plan, provided it submits the amendment for approval by the Council at least forty-five (45) days before the proposed effective date of any changes to the plan.

The Responsible Gaming Plan shall include, at a minimum, the following:

(a) Plan goals, statement of policy and commitment, procedures, and deadlines for implementation;

(b) A process for individuals to make a request to restrict themselves from placing Wagers with the Licensee alone or from all Licensees in Tennessee, both of which must be contemporaneously offered to the individual;

(c) A process for the Licensee to prevent individuals who have requested self-exclusion restrictions from placing Wagers. For each individual who makes such a self-exclusion request, Licensees shall provide the individual with additional responsible gaming resources;

(d) A method to allow the self-exclusion request to be shared with the Council;

(e) A method for receiving information from the Council regarding restrictions from individuals who have requested restrictions from all Licensees;

(f) A self-limitation program where Players have the option to set limits on money and time spent betting, deposit limits, session time limits, and account cool-off;

(g) A plan for making responsible gaming information available and legible on the Licensee's website(s), mobile app(s), advertisements, or other platforms for Interactive Sports Gaming, including publication of a problem-gambling helpline telephone number that provides information about responsible gaming and services, and that has been approved by the Council pursuant to Rule 1350-01-.07(12);

(h) A plan for providing comprehensive responsible gaming training to employees who may interact with Players from the State of Tennessee, including annual or periodic refresher training. Training should equip the trainee to respond to circumstances in which Player account activity may indicate signs that are consistent with gambling addiction;

(i) Procedures to prevent underage gambling, including age-affirmation mechanisms that utilize, at a minimum, month, date, and year of birth that will apply before the Person can gain access to any Sports Gaming System where Players can engage in Interactive Sports Gaming. A Sports Gaming Operator may use information obtained from third parties to verify that a Person is authorized to open an account, place Wagers, and make deposits and withdrawals;

(j) A process to provide Players with information about their play. This includes history, money spent, games played, net wins/losses, limits history, and any other relevant information;

(k) A process to provide Players with updates during play about time and money spent and account balances in cash;

(l) A clear and conspicuous display on the Licensee's website(s), mobile app(s), advertisements, or other platforms for Interactive Sports Gaming indicating that it is unlawful for a Person under twenty-one (21) years of age to engage in Interactive Sports Gaming in the State of Tennessee;

(m) Procedures to prohibit a Person who places Wagers with the Licensee from establishing more than one active Sports Gaming Account with the Licensee; and

(n) Procedures to permit a Person that places Wagers with the Licensee to terminate their Sports Gaming Account at any time, for any reason, and without penalty.

(10) Final Approval of Initial Applications for Licensure and Registration (see Rule 1350-01-.12 for Renewals).

(a) If the Council determines that the applicable application requirements and considerations set forth in the Sports Gaming Act and these Rules have been met to its satisfaction, the Council shall issue a Sports Gaming Operator License or approve the Registration of a Vendor, as applicable.

(b) For each License application approved, the application fee then shall be credited to the annual License fee, and the Licensee shall send the balance of the annual fee to the Council within ten (10) business days of approval of a License. There shall be an automatic License revocation for non-payment of the License fees after thirty (30) days of approval of a License.

(c) No Licensee shall be permitted to accept Wagers unless and until it has submitted both its Sports Gaming System Operational Assessment and Sports Wagering Technology Integrity and Security Assessment, both of which must be completed by a qualified independent testing laboratory that is registered as a Vendor.

(d) Each Licensee and Registrant has a continuing duty and obligation to Immediately Notify the Council of any material change in status or applicable information that, if known by the Council, could disqualify the Licensee or Registrant from holding the License or being approved for Registration.

Notes

Tenn. Comp. R. & Regs. 1350-01-.06

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, 4-49-119, 4-49-120, 4-49-125, 4-49-126, and 4-49-131; and 2023 Tenn. Pub. Acts, Ch. 450.