Legislation that would scrap requirements for sports betting sites in the Volunteer State to hang on to 10% of all the wagering dollars they handle and to use official league data for live wagering is making progress.
Senate Bill 475 passed the Tennessee Senate last week by a vote of 30-0 and is ready to be transmitted to the state's House of Representatives, where similar legislation has already been introduced.
S.B. 475 would make several tweaks to the rules for Tennessee sports betting, including by requiring licensees to pay a privilege tax equal to 2% of their total handle rather than 20% of their adjusted revenue.
A state handle tax would be a first for the U.S., and it would also eliminate the requirement for Tennessee’s online-only sportsbooks to ensure their annual hold is 10% of adjusted revenue or better.
Go ahead and fine me
The legislature is taking another look at the 10% win rate rule after the state’s regulator, the Tennessee Sports Wagering Advisory Council (SWAC), noted most operators failed to achieve that hold last year. As a result, those operators were faced with the option of a “true-up” payment to get to a 10% hold or to pay a $25,000 fine, the latter of which was the preference.
"If I have a choice between paying $1 million 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 the council’s February meeting.
S.B. 475 would ditch the mandatory hold altogether in favor of the handle tax. Operators would be banned from deducting the value of free bets and other promotions from their handle. Furthermore, according to a note from the Tennessee General Assembly's fiscal review committee, the proposed legislative changes would increase annual revenue going to the state by approximately $7.3 million.
Data dump
Another provision of S.B. 475 would remove the state’s current requirement for licensees to exclusively use official data from sports leagues when offering in-play wagering unless the operator can prove to regulators those feeds are not available on “commercially reasonable terms.”
The SWAC is, for the moment anyway, responsible for determining if data is reasonably priced. However, it was the SWAC that requested lawmakers consider removing the data requirement altogether.
The SWAC made the request after SuperBook and Betly sought a declaration from the council that National Football League data provided by Genius Sports was not available on commercially reasonable terms.
“This issue is really complex, to say the least,” SWAC Executive Director Mary Beth Thomas said during a council meeting on March 1. “As you all know, Tennessee is the only state with a mandate worded in the way that ours is, that requires the use of official league data for in-play wagering in this manner. Other states have official league data requirements that can be triggered by league requests, but to our knowledge, our state's unique in our statutory mandate.”
We regulate, they legislate
Thomas also noted the current law does not have any criteria for what makes data reasonably priced and that there is just one source of official NFL data, Genius Sports. She added that Genius had given many reasons why its terms were reasonable, while SuperBook and Betly made several arguments about why they think not.
The SWAC decided to punt the issue to the Tennessee General Assembly to decide. It is now up to the Tennessee House to pick up the baton on the hold and data issues.
“We're an advisory body, we regulate the industry, but the legislature makes the rules,” SWAC Chairman Billy Orgel said during the March meeting.
