Filippo Ferri, chief compliance officer at Delasport, shines a light on the Tennessee sports betting market and highlights how the state could have an influential role in how sports betting is taxed in the U.S.
Delasport’s extensive experience in the global iGaming industry positions the company to provide in-depth insights into emerging markets like Tennessee. Our comprehensive understanding of regulatory landscapes, player behaviors and technological advancements enables us to analyze and interpret market dynamics effectively.
This report delves into Tennessee’s evolving sports betting scene, highlighting significant tax reforms, market trends and future projections.
Market size & revenue
Since its online sports betting launch in November 2020, Tennessee has experienced rapid market growth. In 2024, sports betting in Tennessee surpassed $5 billion, marking a 23% year-on-year increase and reaching a total handle of $5.30 billion.
December alone saw $572.7 million in gross wagers—up 16% compared to the same month in 2023. It also marked the fourth consecutive month with betting volumes exceeding $500 million.
This growth coincided with the first full year of Tennessee’s turnover-based betting tax, which helped drive a 16% rise in tax revenue, totaling $97.2 million for the year.
A pivotal change occurred in July 2023 when Tennessee became the first U.S. state to tax sports betting based on handle rather than revenue. The state implemented a 1.85% tax on total handle, replacing the previous 20% tax on gross gaming revenue. This shift aimed to simplify tax collection and address compliance issues, as many operators struggled to meet the former mandatory 10% hold requirement, which was subsequently eliminated.
In fiscal year 2023, over $4.7 billion was wagered in Tennessee, making it the nation’s largest online-only sports betting market. The state collected $68 million in sports betting taxes that year, indicating healthy operator profits under the previous tax structure. Projections for fiscal year 2025 estimate the handle could reach approximately $5.4 billion, surpassing initial forecasts.
Regulatory landscape
Tennessee’s online-only sports betting model, regulated by the Sports Wagering Council, continues to evolve. Key regulatory changes include:
- Tax Structure: Implementation of a 1.85% tax on total handle, replacing the 20% tax on gross gaming revenue.
- Hold Requirement: Elimination of the mandatory 10% hold, allowing operators more flexibility in managing margins.
- Licensing Fees: Introduction of a tiered licensing fee system, ranging from $375,000 to $750,000 based on operator revenues.
- Responsible Gaming: Continued emphasis on responsible gaming measures, including self-exclusion programs, deposit limits, and advertising restrictions.
These regulatory adjustments aim to create a more sustainable and operator-friendly environment while ensuring consumer protection.
Player demographics
Tennessee’s sports bettors mirror national trends, with approximately 70–72% being male and 28–30% female. The core age group is 25–44, accounting for about 65% of bettors. Younger adults, particularly those aged 21–34, are notably active, with many placing multiple bets weekly.
Geographically, betting activity is concentrated in urban areas and college towns, including Nashville, Memphis and Knoxville. The state’s allowance of wagers on in-state college teams, such as the University of Tennessee, contributes to this localized engagement. Seasonal patterns show peaks during football season and March Madness, reflecting the popularity of the NFL, college football and NCAA basketball tournaments.
Betting preferences
Football dominates Tennessee’s sports betting landscape, with both NFL and college games attracting substantial wagers. Basketball follows closely, particularly during the NBA season and NCAA tournaments. Other sports, including baseball, hockey, golf and tennis, also see consistent betting activity.
In terms of wager types, parlays are especially popular, offering higher potential payouts and aligning with operator incentives under the new tax structure. Live (in-game) betting is on the rise, facilitated by the state’s mobile-only platform, allowing bettors to engage in real-time wagering experiences. Traditional straight bets, prop bets, and futures remain integral to the betting mix.
Market projections
Tennessee’s online sportsbook market is poised for continued growth, driven by strong bettor engagement and regulatory stability. Key projections include:
- Market Growth: Handle expected to exceed $6 billion by 2026, with corresponding increases in tax revenue.
- Legislative Developments: Potential expansion into new betting markets, such as esports, and adjustments to existing regulations.
- Technological Advancements: Increased adoption of AI-driven analytics to refine betting odds and enhance user engagement.
While online casino gaming is not currently legal in Tennessee, the success of such platforms in other states may prompt future discussions on legalization.
A bright guture
Tennessee’s innovative approach to sports betting regulation and taxation sets it apart as a leader in the U.S. market. The state’s commitment to fostering a dynamic and responsible betting environment bodes well for its future growth.
