Volunteer State lawmakers passed a bill that will change things for Tennessee sports betting.
Senate Bill 475 (SB 475) requires Tennessee sportsbooks to pay a 1.85% tax on handle, or the total amount of bets placed in a month, rather than revenue. The adjustment is intended to increase what the state collects. Original estimates have partly fallen short because of a controversial mandatory hold.
The Senate approved the law after it passed the House on Friday, the legislature’s self-imposed deadline for the year. The Senate had previously requested a slightly higher 2% handling tax but has now agreed to the 1.85% figure. If SB 475 is signed into law (which is expected), the state could collect an additional $7.3 million annually.
The bill is now on its way to Gov. Bill Lee, who approved Tennessee’s legal sports betting bill in 2019. This will reportedly be the first handle tax in the United States.
Eliminating the 10% Hold Rate Was Critical
The elimination of the 10% hold rate for operators is a major factor in the bill’s success. By the end of 2022, nine of the state’s 11 sportsbooks had failed to meet the 10% hold level and were fined $25,000. According to comments made at a March 1 meeting, this resulted in a loss of $11.6 million in potential tax income for Tennessee last year.
The Tennessee Sports Wagering Advisory Council (SWAC) – now called the Sports Wagering Council under SB 475 – concluded on March 1 that the 10% hold is too high for its operators.
A fiscal analysis of the bill reported that nine of the then 11 operators did not meet the 10% hold requirement in 2022. And SWAC Executive Director Mary Beth Thomas admitted that certain operators had failed to attain the 10% level for the second year in a row.
Tennessee Betting Revenue Has Never Been Better
The bill comes on the heels of an announcement by the state’s licensed bookmakers. They say they’re experiencing their highest revenue totals since wagering began in Tennessee in November 2020. The best seven monthly revenue totals in total have all occurred in the last seven months. In March, the state had a total sports wagering handle of $392.6 million – a 20% increase from the month prior.
The Volunteer State only offers online sports betting, with no casinos or retail sportsbooks available to the state’s 7 million people.
Who Benefits the Most From Sports Betting Tax Bill?
Critics claim that if the bill becomes law, it won’t benefit bettors. According to the same fiscal analysis mentioned earlier, when bookmakers boost their advertising of parlay wagers, especially same-game parlays, they will likely minimize their tax liability in the future.
Furthermore, the bill’s text repeals the state’s official league data mandate. Previously, SuperBook Sports and Betly contended to the Sports Wagering Advisory Council that paying Genius Sports for official NFL league data was commercially unreasonable The SWAC deferred to the legislature, which chose to repeal the mandate.
Both the state and the sportsbooks may also benefit from the legislation, as state regulators are expected to fully encourage sports wagering companies to push their handles to higher levels and ensure the protection and development of the gambling industry.
Calculators
