Tennessee's Unique Sports Betting Handle Tax System

Watch Tennessee's Unique Sports Betting Handle Tax System - SportsGrid on Dailymotion

Transcript

00:00Sports betting news in the state of Tennessee, according to your tweet just yesterday, sports

00:10betting tax collectors in the state approached collections, excuse me, in the state approached

00:1587.6 million for fiscal year 24.

00:19That's up $4 million.

00:21And this is the initial 12 month period with Tennessee sports books taxed 1.85% on handle

00:27rather than on gross revenue.

00:28You say in this tweet that Tennessee is the only state where they handle tax can explain

00:33why they have it versus other states not having it.

00:36Yes, certainly Mike and they are unique in in the sense that they are the only state

00:43that applies a tax on the overall betting volume in the state as opposed to every other

00:51legal jurisdiction that applies a tax to the revenue that the sports books make each

00:58month.

00:59So this was a change that happened a little over a year ago.

01:03And like I mentioned in that tweet, we did see, you know, that this first 12 month period

01:10of this handle tax generate about $4 million extra in tax collections for fiscal year 2024

01:19compared to the prior fiscal year in Tennessee and a variety of reasons.

01:24I think why this handle tax came to be and the main one was when they legalized sports

01:32betting in Tennessee, the law and the regulators put in place a minimum 10% hold for the sports

01:41books.

01:42So the sports books had to win essentially at least 10% of all the money that was bet.

01:51And by requiring that, it would essentially, you know, have regulators and state government

01:57in Tennessee be able to accurately forecast their fiscal projections.

02:05The problem with that is holding 10% is quite challenging.

02:10You know, a lot of times we see the average hold across multiple jurisdictions falling

02:17below that 10% on a monthly basis.

02:21So in Tennessee, in addition to that minimum 10% hold requirement, which has now gone away

02:27as they transitioned to that handle tax, included with that minimum hold requirement was a level

02:34of fines that were passed down to the sports books if they did not meet that requirement.

02:40And that proved to be a little bit of a failure in Tennessee, which is why we did see that

02:461.85% tax on handle as opposed to a tax on gross revenue like we see elsewhere.

02:56You know, I think the taxes in the sports betting industry is an interesting topic.

03:03You have New York with their 51% tax, which a lot of the sports books do still grovel

03:10about.

03:11And as we've seen in recent months, Ohio doubled their tax rate from 10% to 20% on

03:19gross revenue for operators.

03:21Illinois just increased their tax rate.

03:26New Jersey is talking about it as well.

03:29So proving and paying off some dividends in Tennessee, applying that handle tax as opposed

03:36to revenue, but still the only state in the country to do that, you know, apply that tax

03:43in that way, Mike.