Extra Tax Payments Likely After Some TN Sportsbooks Miss Minimum Hold

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TN sportsbooks

It looks like the state of Tennessee will receive more tax dollars out of TN sportsbooks based on December’s report.

Sportsbooks took $341.8 million in bets last month, which is down from the previous two months. Operators held 7.2% for $24.6 million in sports betting revenue, but taxable revenue fell to $16.5 million after various deductions.

That led to $3.3 million in tax dollars paid to the state.

Minimum hold rule in focus

December’s results are not the main focus, though.

The real story is about the $2.7 billion bet in 2021 and the $198.5 million in taxable revenue reported.

That equals a 7.3% hold – a far cry from the 10% mandatory minimum TN sports betting operators are required to hold. The minimum hold requirement is the only such rule in the United States.

Which TN sportsbooks missed the minimum?

Unfortunately, Tennessee’s sports betting reports are minimal and do not include a monthly breakdown by operator. Tennessee regulators denied LSR public records requests for more detailed information.

That means it is not known exactly what each operator held last year. The Sports Wagering Advisory Council already denied a public records request stating the operator-specific data is confidential by statute.

Tennessee has nine live sportsbooks after the launch of peer-to-peer operator Wagr this month. Only four were live as of Jan. 1, 2021, though, which means they are the only ones under review for now:

New regulator enforcing TN sportsbooks rules

Luckily for those operators, the new regulator decided to change the rules surrounding the minimum hold. What was once a $25,000 fine and a formal violation now includes the option of a “true-up” payment.

Operators can choose to pay the difference in taxes between their actual taxable hold and the 10% to avoid a violation.

Paying the difference seems like the likeliest outcome, at least for the three national brands. The concern about a violation and how that affects licensure in other US sports betting jurisdictions was one of the points brought up when sportsbooks pushed to have the minimum hold eliminated.

BetMGM, DraftKings, FanDuel account for most of market

BetMGM, DraftKings and FanDuel likely take the vast majority of bets in Tennessee. Look at neighboring Virginia for proof: the first five operators that launched within two-and-a-half weeks from the market opening took 96.85% of all handle from launch through November.

Caesars Sportsbook, which launched last March under the William Hill brand, is likely the only other operator live last year that took significant market share in 2021.