Tennessee making progress in push to drop mandatory hold requirement
Legislation that would tax operator handle gaining traction in both House and Senate
Tennessee is one of the more unique online sports betting markets in the US, but one of its most divisive requirements could soon be a thing of the past.
Currently, operators in Tennessee are required to maintain a 10% hold on all wagers or face punitive measures, a thorn in the side of the industry that state lawmakers are trying to address through new legislation.
SB 475, which would scrap the mandatory hold requirement in favor of a 2% tax on handle, unanimously cleared the Senate by a 30-0 vote last week and is now headed to the House, which has already introduced its own version of the legislation.
Tennessee’s online-only sports betting market is overseen by the Tennessee Sports Wagering Advisory Council (SWAC), which took over the role from the state lottery in 2022.
The SWAC was thus grandfathered into enforcing Tennessee’s 10% hold mandate, which stipulates operators must annually choose between a ‘true-up’ payment to meet the requirement or pay a $25,000 fine, with the latter representing a significantly lower penalty.
After nine of the state’s 11 operators failed to reach the 10% threshold in 2022, the SWAC noted the universal preference to pay the fine.
“If I have a choice between paying $1m and paying $25,000, I’m going to take the $25,000 every time if nothing’s going to happen to me,” SWAC member John Valliant said during a February meeting.
If passed, SB 475 would do away with the hold mandate in favor of the nation’s first handle tax, the effect of which would serve to increase annual state tax revenue by approximately $7.3m per a recent note from the Tennessee General Assembly’s fiscal review committee.
SB 475 is also seeking to address another controversial element of Tennessee’s sports betting regulations that requires operators to use official league data for the purposes of in-play wagering.
The SWAC requested that lawmakers consider eliminating the requirement all together after two operators – SuperBook and Betly – petitioned the council on grounds that NFL data from Genius Sports was not available on ‘commercially reasonable terms’ as stipulated by state regulations.