Tennessee's Unique Sports Betting Handle Tax System
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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.