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The Tennessee Sports Wagering Advisory Council (SWAC) approved emergency rules on Thursday (June 15) that will allow the agency to implement several regulatory and tax changes overwhelmingly adopted by the state legislature during this year’s session.
Republican Governor Bill Lee signed Senate Bill 475 on May 17 that taxes sports betting in Tennessee at a 1.85 percent rate on an operator’s wagering handle, replacing the previous tax rate of 20 percent on gross revenue.
Tennessee, which launched mobile wagering in 2020, will be the first state in the U.S. to tax an operator’s total handle instead of its gross revenues when the emergency rules go into effect on July 1.
The tax pivot was one of several changes in the law, including introducing a tiered license fee structure for mobile sports-betting operators to replace the current annual fee of $750,000.
Beginning next month, sportsbooks will also no longer be required to hold 10 percent of handle each month, a rule which resulted in nine of the 12 active and registered licensees facing a $25,000 fine last year.
The new fee structure will see operators pay a $750,000 annual fee if they report more than $100m in wagering handle and pay $375,000 if receiving less than that amount.
Stephanie Maxwell, general counsel for the Sports Wagering Advisory Council, said the emergency rules also authorize vendors to register every three years instead of annually.
Among the emergency rules submitted to the Tennessee Secretary of State Tre Hargett’s office on Thursday was a provision removing the current requirement that licensees use official league data for all in-play wagers.
The SWAC is also dropping the "Advisory" from its name.
“We are working on the permanent rules,” said Maxwell, adding that the emergency rules were good for 180 days until December 28, 2023.
As of Friday (June 16), the emergency rules had not been posted on the Tennessee Department of State, Division of Publication’s website.
Maxwell told the council there needs to be a 90-day period before the permanent rules take effect, meaning they have a September 29 deadline to file permanent rules with Hargett’s office. The SWAC will hold a workshop on the permanent regulations on August 31, and then hold a vote on September 6.
Councilmember Tom Lee asked Maxwell if she could summarize some of the comments that have been received from the gaming industry.
One of the changes, Maxwell said, deals with how accounts are funded especially in Tennessee where use of credit cards is illegal. She added operators use a single wallet or global wallet within their apps that allow customers to place wagers in states where sports betting is legal, and they are licensed.
Maxwell noted that these mobile wallets would have to be segregated so that credit cards are not allowed to be used in Tennessee.
On Thursday, the SWAC also granted executive director Mary Beth Thomas the authority to hold a rulemaking hearing to receive public comments on proposed permanent fantasy sports rules and sports wagering permanent rule revisions.
Thomas was further given the authority to approve renewals of fantasy sports operator licenses until the council adopts permanent fantasy sports rules.
“A couple of renewals will need to be addressed before the next meeting,” Thomas said, without identifying the operators.
Lee also signed Senate Bill 218 on April 18, transferring licensing and oversight authority for online fantasy sports contests from the Tennessee Secretary of State to the Sports Wagering Advisory Council.
Currently, there are 11 fantasy sports operators licensed in Tennessee.
