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Tennessee’s legislative session included passage of SB 475, a bill that will have transformational effects on the state’s sports wagering industry and perhaps begin to reverse one key precedent set for other states.
SB 475 removes the state’s official league data mandate and also switches its tax structure from a 20% tax on adjusted gross revenue (with a controversial mandatory 10% hold) to a 1.85% tax on operator handle. The bill, which was signed into law by Gov. Bill Lee on Wednesday, takes effect July 1.
The two major aspects of the Tennessee bill have drawn differing feedback from operators and industry experts, with the official league data mandate removal more widely applauded. In effect, the rule required that sportsbook operators pay leagues for data feeds comprised of publicly available information in order to offer certain bets in connection with those contests.
“I thought it was dumb then, and I’ll say I think it’s still dumb now,” Brendan Bussmann, principal for B Global, a Nevada-based gaming consulting firm, said of official league data mandates. “That’s just government overreach.”
Numerous benefits to mandate removal
SuperBook Sports and Betly complained to the state regulator, the Tennessee Sports Wagering Advisory Council, that the price of official NFL data offered by Genius Sports was unreasonable. The regulator punted the decision to the legislature, which removed the mandate in hopes of letting the commercial market sort itself out privately.
Bussmann agrees with that line of thinking, as multiple major mobile sportsbooks have deals with leagues and their data providers. For some operators, paying a premium for official data ensures the latest information to use for live betting odds. Those national deals make sense for major operators and leagues, and those partnerships form without states mandating it.
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“I look at it much more as you’re getting off the books unnecessary legislation than anything else,” Bussmann said.
Other operators say they’re plenty capable of thriving in a market while using unofficial data sources. The official league data mandate was questioned at the time it was implemented.
The “official league data” requirement via amendment in the Tennessee bill is messy and open for interpretation by board and otherwise.
What qualifies as an inability to provide? What’s commercially reasonable? Pretty nebulous. @EdMillerPoker https://t.co/NM7jShzjp6 pic.twitter.com/uz5vAxkeu6
— Sports Handle (@sports_handle) May 1, 2019
“We’ve operated in Nevada without official data, which we’ve been fine with for over 30 years,” said Jay Kornegay, executive vice president of race and sportsbook operations at the Westgate SuperBook.
Ryan Rodenberg, a Florida State University professor and legal sports betting expert, believes there’s another benefit to official league data mandates being removed.
“The one element that just never really gets raised by sportsbook operators or regulators is how having a single source of information and news about sports betting allows a single point of failure to disrupt the integrity of the entire betting market,” said Rodenberg.
Rodenberg worries that if a state’s sports betting operators are using just one data source, they’re subject to issues should that informational source become temporarily corrupted. If one piece of data is inaccurate and that information is used across multiple sportsbooks, it could lead to inaccurate information being presented to bettors.
“Having a single provider of news and information is way worse than having multiple providers,” Rodenberg said. “They serve as a robust check against each other.”
Handle tax less popular
While the official league data mandate removal is popular for numerous reasons, operators aren’t thrilled with the first-of-its-kind handle tax. Tennessee regulators were concerned the state was leaving tax revenue on the table by not severely penalizing operators who failed to hit the 10% hold minimum.
The SWAC kicked the conversation to the legislature in hopes of letting legislators fix the issue, and they came up with the unusual handle tax idea.
“When they talk about taxing the handle, I think it’s very dangerous, as it effectively forces the operators to stay away from taking riskier bets,” Kornegay said. “It ultimately passes that expense onto the players, meaning we have to have higher splits, lower odds, lower-paying parlays to absorb that type of tax.”
While the official league data mandate removal may benefit smaller operators in the industry — paying less for data could help a smaller operator stay afloat in an industry being dominated by major players like DraftKings and FanDuel — Kornegay worries the tax on handle could have the opposite effect.
“I don’t even know how some operators would survive with a handle tax,” Kornegay said.
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