Tennessee Officials Approve Emergency Rules Before Handle Tax Begins

Tennessee Officials Approve Emergency Rules Before Handle Tax Begins
Fact Checked by Nate Hamilton

Ahead of the July 1 start date for a new sports betting tax, the Tennessee Sports Wagering Council met Thursday to pass short-term regulations to support that and other changes brought on by state lawmakers.

Last month, Gov. Bill Lee signed Senate Bill 475 into law. Most notably, the new law makes the Volunteer State the first to tax sportsbooks by handle rather than revenue. A 1.85% handle tax will replace a 20% tax on revenue.

With no meetings set before next month’s start, the council held an emergency meeting virtually to discuss and pass the temporary rules allowing the Tennessee sports betting regulatory body to carry out the law.

The emergency rules, approved by a 7-0 vote, will take effect on July 1 and last 180 days. In the meantime, council staff will continue working on the permanent rules.

Stephanie Maxwell, the council’s general counsel, said the agency must publish a notice on the permanent rules, hold a hearing on them and publish them on the Secretary of State’s website 90 days before they go into effect.

The deadline to present to the Secretary of State is Sept. 29. Maxwell said the council would likely hold a hearing on Aug. 31, giving staff a week before the council votes to approve the rules at its Sept. 6 meeting and submit them for publication.

Maxwell said that operators have already started sharing feedback on the temporary rules with council staff.

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Minimum Hold, Sports Betting Data Mandates Going Away

SB 475 also made other changes besides establishing a new tax.

The new law also removes language that required Tennessee’s licensed sports betting operators to abide by a 10% hold requirement, a controversial measure since it was enacted years ago. It also eliminates the requirement for operators to use official league data and establishes a new fee structure for operators renewing their licenses.

In addition, the law formally removes the word “advisory” from the council’s title, a move it has implemented on its website.

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Tennessee May See Revenues Drop With New Tax

While the federal government has had a .25% excise tax on sportsbook handle for decades, Tennessee will become the first state to levy such a tax.

If the new law was in effect now, the state would have generated less money than it did in May.

Under the soon-to-be revoked tax, Tennessee received more than $7.1 million of the sportsbooks’ adjusted gross revenues totaling $35.7 million.

If the handle tax had been in place, the state would have received about $5.2 million.

The new law keeps how the state will spend the tax money. Education will continue to receive 80% of the revenue, while 15% will be allocated to a fund for local governments. The remainder is used for mental health funding.

Tennessee has 13 licensed operators who offer online sports betting statewide. They are Bally Bet, Barstool Sportsbook, Betly, Tennessee BetMGM sportsbook, Caesars Sportsbook, DraftKings, Fanatics Sportsbook, FanDuel, Hard Rock Sportsbook, SuperBook, Tennessee Action 24/7, WynnBET and ZenSports.

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Author

Steve is an accomplished, award-winning reporter with more than 20 years of experience covering gaming, sports, politics and business. He has written for the Associated Press, Reuters, The Louisville Courier Journal, The Center Square and numerous other publications. Based in Louisville, Ky., Steve has covered the expansion of sports betting in the U.S. and other gaming matters.

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