Tennessee To Drop Data Mandate As Part Of Sports Wagering Reshuffle

March 20, 2023
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The first U.S. state to impose a mandate for sports-betting operators to use official league data would also become the first to repeal the requirement under statutory amendments approved by two House and Senate committees last week.

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The first U.S. state to impose a mandate for sports betting operators to use official league data would also become the first to repeal the requirement under statutory amendments approved by two House and Senate committees last week.

Amendments to repeal the official league data provision from Tennessee’s 2019 sports wagering act were added to two bills in the House and Senate that formerly had proposed somewhat more routine changes to the law.

Tennessee in 2019 became the first state to pass a law requiring operators to use official league data for in-play betting, an at-the-time controversial move that has since been followed by at least seven states, including Illinois, Michigan, Virginia, and Arizona.

Tennessee’s law is slightly different as it requires operators to use official data provided such data is available from sports leagues on “commercially reasonable terms,” whereas elsewhere the mandate only applies if leagues petition regulators to enforce it.

Republican state Representative Andrew Farmer acknowledged that major sports leagues were not best pleased by the amendment that was approved alongside his broader sports-betting measure, House Bill 1362, by the Tennessee House State Government Committee on Wednesday (March 14).

“They’re not happy with that,” Farmer told the committee. “Because it is a mandate that all these companies use that one source for information, so they are not happy with losing that mandate.”

Approval of Farmer’s bill by the House committee came one day after an identical amendment was also attached to Senate Bill 475 as that companion measure was approved by the Senate’s State and Local Government Committee.

Tennessee sports-betting regulators had flagged earlier in March that the official data issue was likely to be reassessed by the legislature after several operators complained that the cost of acquiring official NFL data was not commercially reasonable, and asked the Tennessee Sports Wagering Advisory Council to weigh in.

The potential repeal of official data is not the only substantive shake-up to Tennessee’s nearly four-year-old sports-betting law now being considered by state lawmakers through the companion House and Senate bills.

As a result of further amendments adopted in committee last week, both bills now also purport to finally resolve Tennessee’s controversial regulatory requirement for all sportsbook operators to hold a minimum 10 percent of wagers or risk paying additional tax payments or a fine.

SB 475 would replace Tennessee’s current 20 percent tax on gross sports wagering revenue with a tax of 2 percent applied to handle. HB 1362 would take a similar approach, but proposes a 1.85 percent rate. Both bills would also add provisions to enable operators to deduct federal excise tax payments from their taxable handle in Tennessee.

House lawmakers previously suggested the same 2 percent handle tax as their counterparts in the Senate before settling on the slightly lower rate, according to Farmer.

A handle-based tax of 1.85 percent would still lead to an increase in state revenue overall “and it’s going to make plenty of money,” Farmer told the House State Government Committee.

“We just want to try to be as business friendly as possible because the more money these [operators] make, the more tax revenue that’s gonna be there.”

Another difference between the House and Senate bills is a proposal in HB 1362 for a staggered licensing fee structure to replace the current system that requires operators to pay a flat fee of $750,000 every year.

Under HB 1362, as amended, operators would still pay $750,000 as an initial fee but only pay the same amount annually if they receive more than $500m in annual handle. Operators would pay a $500,000 annual fee if recording handle of $100m to $500m, and $250,000 if less than $100m.

Other amendments proposed by the House and Senate bills include renaming Tennessee’s sports-betting authority as the Tennessee Sports Wagering Commission to reflect the fact it no longer acts in an advisory capacity to the state’s lottery board, as initially was the case under the 2019 law.

The bills also would codify state regulations that allow operators to cancel bets in the case of an obvious error, and clarify various licensing requirements for vendors as well as the investors and key personnel of sports-betting companies.

HB 1362 and SB 475 will now be considered by finance committees of both the House and Senate and then must also be approved on the floor of each chamber before being reconciled into a final version for signature by the governor.

Tennessee lawmakers are scheduled to be in session until May 4.

In addition to the sports wagering amendments, Tennessee lawmakers are considering separate legislation to hand regulatory authority over fantasy sports contests from the Secretary of State to the Sports Wagering Council.

Such a bill was passed by the House on March 9, while an identical measure is also advancing in the Senate.

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