Lawmakers in Tennessee are changing the way legal sports betting in the state will be taxed.
Earlier this month, Senate Bill 475 — first introduced on January 25 — unanimously passed in the state’s Senate by a 30-0 vote. The bill, which proposes to tax sports betting in Tennessee with a 2% rate on the total handle of sportsbooks, recently passed in the House by a 75-7 vote.
SB 475, which still needs a signature from Gov. Bill Lee, takes a shift from Tennessee’s current regulations that require sportsbooks to pay a 20% tax on their adjusted gross income. If signed, SB 475 would make Tennessee the first state in the U.S. to introduce a tax on betting handle.
By FY2024, the bill is projected to increase Tennessee’s revenue by $7.36 million annually.
SB 475 also proposes to nix Tennessee’s hold requirement, which forces online betting sites in the state to hold 10% of the money they handle each year. The bill would also eliminate Tennessee’s requirement for operators to use official sports league data for in-play wagering.
Operators are fined $25,000 in Tennessee if they are unable to adhere to the state’s hold rule.
SB 475 isn’t the only bill introduced in Tennessee that aims to change the state’s tax requirements for sports betting. House Bill 1362 — also introduced in January — aims to tax the handle of online wagering operators in the state at a 1.85% rate. HB 1362 was discussed by the state’s House Finance, Ways, and Means subcommittee in March but no vote has been taken.
Current state of affairs
Tennessee emerged as one of the first states to embrace sports betting in 2019 after the U.S. Supreme Court allowed states outside of Nevada to offer sanctioned wagering the year prior.
The Volunteer State offers only online sports betting with no casinos or retail sportsbooks providing the state’s 7 million residents with access to sports wagering. The state has awarded 11 licenses to some of the largest sportsbooks in America, including FanDuel, DraftKings, and BetMGM. In 2022, the group of operators had a total handle of more than $2.5 billion.
Sportsbooks in Tennessee have carried that momentum into 2023. In March, the state had a total sports wagering handle of $392.6 million — a 20% increase from the month prior.
The favorable results, which were bolstered by March Madness, saw the state’s sportsbooks generate $45.5 million in gross revenue, up 43% from February. As a result of Tennessee’s hold rule, sportsbooks paid an $8.7 million tax bill to the state, up $2.3 million month-over-month.
Fanatics Sportsbook is the latest gambling operator to gain market access in Tennessee after it was awarded an online license on March 1. Fanatics has yet to announce its launch date.
