The provision requires sportsbook operators in Tennessee to win at least 10% from bettors as their gross revenue “hold.” The national average sits around 7%, but Tennessee requires that operators reach the 10% mark.
The most recent revenue report provided by the Tennessee Sports Wagering Advisory Council (SWAC) wraps up 2021’s data, revealing that $2.7 billion was wagered at the state’s mobile sportsbooks in 2021. Tennessee received $198 million in tax revenue, giving it a hold of just over 7% for 2021.
Some sportsbooks will be penalized
While Tennessee’s revenue reports don’t break down the numbers by operator, it’s clear that some sportsbooks will have to accept penalties for failing to reach the required hold threshold.
GGR Win Rate: 8.76%
AGR Win Rate: 7.24%
— Chris Altruda (@AlTruda73) January 21, 2022
When the rule was first introduced by the Tennessee Education Lottery (TEL) upon the launch of mobile sports wagering in the state on Nov. 1, 2020, the penalty for failing to reach the 10% hold was a $25,000 fine upon an annual review of the operator’s hold. That rule was slightly altered by the SWAC in early December, when the regulatory body approved its emergency rules.
Now, operators that fall short can either pay the $25,000 fine or a privilege tax payment equal to the difference between what they would have paid had they adhered to the hold and what they actually paid. The SWAC confirmed to TN Bets that operators are able to take advantage of that true-up payment option for failing to meet the hold in 2021.
Avoiding the fine can help keep a violation off the operators’ record, which can prove beneficial when applying for licenses in other states.
Will the 10% hold stay?
Tennessee Action 24/7 recently told TN Bets that it was pleased with its early work with the SWAC. A few major sportsbook operators, like DraftKings and FanDuel, declined comment, with the thought that it was too early in the process to speak on their relationship with the SWAC.
Many national operators hope the state’s 10% hold rule will eventually be abolished, although it would come as a surprise if the SWAC removes the rule in the near future. The council approved its emergency rules on Dec. 2, giving it 90 days to implement a more permanent set of rules. That leaves the SWAC with about another month to adopt permanent rules, and in all likelihood, those regulations will mirror the emergency provisions adopted by the group.
Members of the SWAC left open the possibility in previous meetings that at some point in the future, the 10% hold could be revisited and possibly changed, but there has been little to no indication in recent public meetings that an alteration is coming soon.