(Thursday, May 25) For the first time regarding sports betting tax in any US state, lawmakers in Tennessee have voted in favor of taxing sportsbooks on total handle rather than adjusted growth revenue. The bill also seeks to remove the 10% monthly hold on handle that was previously imposed on Tennessee sports betting companies.
Big Changes at the Right Time
The bill unanimously cleared a Senate Vote in January, 30–0. The State House passed the bill in April by a 75–7 vote. While Tennessee Governor Bill Lee still needs to sign on the dotted line, the outlook is incredibly positive.
The bill aims to introduce a 2% tax on in-person and online sportsbooks’ entire handle, which will be a first for any US state. Currently, sportsbooks pay a 20% tax rate on their adjusted gross revenues.
The 10% Hold
Online gambling is a lucrative industry in Tennessee. In 2022, $3.77 billion was put down on sports betting alone. Lawmakers originally put a 10% hold requirement on monthly revenues in a bid to stop sportsbooks from having massive handles on total wagers bet online or in-person.
However, even the best online sports betting sites and in-person sportsbooks were failing to hit the 10% hold, while the $25,000 fine simply wasn’t making a difference. Lawmakers estimated that the state could stand to lose out on around $26 million annually if they continue with the current legislation.
The new 2% total handle tax will remove the 10% hold requirement.
There are two other changes that the new bill will bring in if it is signed off.
- License fees may be lowered for smaller sportsbooks. Operators with a handle below $100 million will get a 50% discount on the $750,000 renewal. License fees must be paid upfront every three years rather than split annually, as they were previously.
- Smaller sportsbooks might not have to use official league data for their offerings, as they argued successfully that the fees for these official data partners were too high.
One To Watch
The state of Tennessee is on the verge of breaking new ground in the sports betting industry in the US. If the bill does pass, it will be interesting to watch its impact on sports betting in the state and countrywide.