Lottery says proceeds recovering but warns of structural pressure; sports wagering agency seeks four staff slots amid litigation risks
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Summary
Lottery officials told the Finance Committee that five‑year projections show modest growth but program demand and expenses for 15 lottery‑funded programs could outpace revenue; the Sports Wagering Council requested four additional positions ($839,000 authority) to bolster compliance while warning of litigation risks tied to prediction markets.
Officials from the Tennessee Education Lottery Corporation and the Tennessee Sports Wagering Council briefed the Senate Finance Committee on the fiscal outlook for lottery proceeds and operational needs for sports wagering regulation.
Rebecca Paul, president and CEO of the Lottery Corporation, said the agency will be approximately $30 million ahead of the funding board's projected transfers to the lottery education account for the current year and recommended using a five‑year rolling average for projections because large multistate jackpots create cyclical variance. "We will be approximately $30,000,000 ahead..." she said, while warning that slower growth and program expansions could require drawing on reserves or policy adjustments to avoid pro rata reductions to funded programs.
Andy Davis, the lottery's chief financial officer, said the budget projection for fiscal 2027 uses a conservative 2% year‑over‑year growth estimate and cited projected net lottery proceeds around the $435 million range for fiscal 2026 with modest growth thereafter.
Marybeth Thomas, executive director of the Tennessee Sports Wagering Council, told the committee the council is not funded from privilege tax transfers and instead covers operations with licensure and registration fees. The council requested reallocation of spending authority to fund four additional positions — a compliance analyst, compliance attorney, assistant general counsel and an internal auditor — at an estimated $839,000 in reallocated authority. "We ask you to consider that the industry that we regulate has grown significantly...to a $7,000,000,000 a year industry in Tennessee," Thomas said, noting increasing compliance and investigative demands.
Members pressed officials on risks and collection: committee leadership emphasized that lottery‑funded programs have multiplied over two decades and asked whether the lottery can continue to fund 15 programs as expenses grow. Chair Watson highlighted that earlier use of reserves had covered recent shortfalls and urged members to consider policy choices for lottery proceeds. Committee discussion also addressed litigation over prediction markets and the potential that adverse rulings could reduce sports wagering revenue streams that otherwise support education programs.
No final budget actions were taken; leaders said they would continue deliberations and consider the requests in the context of the overall budget and pending litigation.
