Tennessee Sports Betting

In April 2019, legislation to legalize sports betting in Tennessee passed in the House of Representatives. House Bill 1, filed earlier in the year, would permit online sports gambling, but an amendment to the legislation removed a provision that would allow for retail sports betting. The bill was also approved in the Senate Finance committee and headed to the Senate floor, where it cleared by a 19-12 vote. The bill then moved to the desk of Gov. Bill Lee, who said he would allow it to become law without his signature.

The legislation made Tennessee the first U.S. state with a mobile-only sports betting law. Sports betting launched in November 2020 when the first four sports betting operators were licensed. Commercial gaming operators can apply for licenses to operate online sports betting. Since launch, the licensed operator count has grown to twelve, including DraftKings, FanDuel, Caesars Sportsbook, BetMGM, Bally Bet, BetRivers, ESPN Bet, and others. Oversight was initially provided by the Tennessee Lottery's Sports Wagering Advisory Council; the independent Tennessee Sports Wagering Council (SWC) has since assumed full regulatory authority over the market.

Tennessee's sports betting tax structure has undergone significant reform since launch. The state originally imposed a 20% tax on adjusted gross gaming revenue combined with a mandatory requirement that operators hold a minimum of 10% of total wagers each month (with a $25,000 fine per month of non-compliance).

In May 2023, Governor Bill Lee signed SB 475 into law, replacing the 20% AGR tax with a 1.85% tax on total wagering handle — the amount of each bet placed — effective July 1, 2023. Tennessee is the only U.S. state to tax sports betting based on handle rather than revenue. The mandatory 10% hold requirement was simultaneously eliminated. The tax is applied after deducting the federal 0.25% excise tax on handle. Revenue from the state's 1.85% handle tax is distributed as follows: 80% to the Lottery for Education Account, 15% to local government, and 5% to the Department of Mental Health and Substance Abuse Services.