WEEKLY FEATURE: Tennessee Legislature Passes Bill To Tax Sports Wagering Handle

Lawmakers in Tennessee have approved SB472 that addresses several issues in regards to sports betting. Now it awaits the governor's signature to become law.

WEEKLY FEATURE: Tennessee Legislature Passes Bill To Tax Sports Wagering Handle

Tennessee is one signature away from becoming the first state in the nation with legal sports betting to change the way it collects revenue from sportsbooks.

Currently, the state, like the other 37 that offer legalized sports betting in the U.S., takes a percentage of the sportsbook’s revenue. In Tennessee’s case that rate is 20 percent.

What the Volunteer State does differently than any other state, however, is that they instituted a mandatory hold of 10 percent. The hold is the money a sportsbook keeps from bets made by customers.

Many sportsbooks in Tennessee, however, were having problems keeping up with the 10 percent hold. They instead were bypassing the requirement by paying a $25,000 fine. Public records showed that nine of 11 sportsbooks opted for the fine.

The legislation, SB472, that was passed by both the state House and Senate last week, now sits on Governor Bill Lee’s desk, hopefully awaiting his signature to make it law.

SB472 would eliminate the 10 percent hold. It would also change how revenue from sportsbooks are taxed.

Instead of taxing the hold, which is customary, the state lawmakers have agreed to tax the handle, the amount of money a sportsbook receives from bettors. The tax rate was a point of contention between members of the Senate and House. The Senate was looking at a 2 percent rate. House members insisted on 1.85 percent, which is what was settled on.

The intention is to put more money in the state’s coffers, but while it should work in theory, it could backfire if the handle doesn’t reach expected numbers. A perfect example of that was the handle for March 2023. March is usually a big month for sportsbooks because of college basketball’s March Madness.

This year, the state’s sportsbook collected $392.6 million in wagers. Under the old structure, the state would have collected $8.7 million in taxes. With the proposal in SB472, the collected taxes would have been $7.2 million.

The other big issue addressed in SB472 was the official data mandate.

Sportsbooks now are instructed they must pay Genius Sports for NFL league data. Both SuperBook Sports and Betly argued to the Sports Wagering Advisory Council (SWAC) that paying Genius Sports for official NFL league data was commercially unreasonable.

SWAC chose to kick that can down the road to the legislation, taking no action on the request. Lawmakers put language into SB472 that eliminates having to use official league data such as Genius Sports.