The piece of legislation that revised the tax structure for sports betting in Tennessee drew headlines for its switch from taxing revenue to taxing handle. However, there were other changes in the legislation, SB475, that will impact those operating in the state, particularly suppliers.
Previously vendors operating in Tennessee needed to register with the state but were not required to pay fees for a license. The cost of operations has increased substantially with the new law, which went into effect on July 1.
Vendors, which include a range of suppliers from payment processing to geolocation to official data providers, will need to start paying fees once their initial license expires.
The costs of these licenses vary depending on what kind of vendor is applying for a license. Most require three different payments–one at application, one on the one-year anniversary, and another on the second anniversary of the license. The license periods run for three years.
Here is a look at the costs for each vertical:
- Geolocation services, platform services, and PAM providers: $150,000 divided into three $50,000 payments
- Risk management, oddsmaking, and official data providers: $75,000 divided into three $25,000 payments
- Independent testing labs: $45,000 divided into three $15,000 payments
- KYC and payment processors: $30,000 divided into three $10,000 payments
Payments will go into effect when a vendor’s initial, free registration with the state is up for renewal.
With an open market and relatively low operator license fees of $750,000 for a three-year license, Tennessee has been a state for smaller operators to mobilize in the US. Local operator Action 24/7 continues to take action in the state. Smaller operators like Betly, SuperBook, and the since-shuttered TwinSpires and Wagr also mobilized in the state. Tennessee was also the first state that Fanatics Sportsbook chose to launch in beta in Tennessee before any other state in part because of the ease and simplicity of launch.
It is unclear how much the new changes related to operator taxation and the new fees associated with vendors could impact Tennessee’s reputation as a state accommodating to smaller operators and start-ups.
