A Different Kind of Gamble: Tennessee’s Approach to Collecting Taxes on Sports Betting Handle

By: Eli Milligan[1]

The Start of Sports Betting in Tennessee

            Tennessee recently made some changes to its sports betting laws by adding revisions which “strengthen player protections and build on ongoing efforts to eliminate fraudulent activity by patrons on the wagering platforms.”[2] The current state of the Tennessee Code concerning sports betting is not necessarily what it used to be, as revisions have been made to the Code since its inception, but the intent behind the legislation has remained the same: to leave a lasting, positive impact on Tennessee’s economic and social health.[3]

            The “Tennessee Sports Gaming Act,” signed by Governor Bill Lee, passed through both chambers of Tennessee’s legislature and went into effect on July 1, 2019.[4] Over a year later, in November 2020, online sports betting opened in the state with the “best debut in the history of U.S. legal sports betting, generating more in wagers in the market’s first month than any other state in history.”[5]

Millions of Dollars Later. . .

            This massive avalanche of online sports betting in Tennessee has continued to the present day. This past April enjoyed a 21.7% increase from April 2024 in terms of total amount wagered in this state, reaching $463.6 million in gross handle[6] for the month.[7] With the growth that sports betting has seen in the first half of this year, it is safe to assume that, in 2025, Tennessee is on pace to easily “surpass the $5.27 billion in handle it generated in 2024.”[8] In total since online sports betting opened, Tennessee bettors have wagered over $18 billion,[9] with over $2 billion of that coming from just the first five months of 2025.[10]

Tax Implications of the Act

As previously stated, the goal of passing sports betting legislation was to positively impact the state’s economic and social health. The manner in which that end can be and arguably is being achieved is through taxes, specifically the privilege tax codified in the current Tennessee Sports Gaming Act.

            The most current version of the Tennessee Sports Gaming Act, codified at Tenn. Code Ann. § 4-49-101 et seq, provides that it is a “taxable privilege to offer sports wagering in this state. . ..”[11] Specifically, Tennessee imposes a tax of 1.85% on the gross amount of money wagered in the state.[12] Uniquely, Tennessee is the only state to base its tax rate on sports betting on the handle.[13] While 1.85% may sound like a small percentage, when bettors are wagering billions of dollars per year, this adds up quickly. For example, for every $1 billion that is legally bet on sports in Tennessee, the state collects approximately $18.5 million in taxes under the Act. This begs the question: what is the state of Tennessee doing with all of the tax revenue it is collecting on sports betting?

            The answer to this question lies no further than the text of the Act itself. The Act mandates that 80% of the taxes collected under this section of  the Act[14] are  to be “distributed by the [sports wagering advisory] council to the state treasurer for deposit into an account. . . which is [then] administered by the state treasurer for use of local education agencies (LEAs), as defined in § 49-1-103, for the construction and maintenance of public school buildings.”[15] Based on that, 1.48% of every dollar wagered in the state of Tennessee is placed into an account which is then administered by the state treasurer for the building and maintenance of public schools. Applying that to the example given earlier, in theory, for every $1 billion wagered in this state, Tennessee is collecting $14.8 million which it then uses for building and maintaining local public schools.

            This seems to be an efficient way for the state of Tennessee to generate some extra tax revenue using a path that Tennessee, as historically conservative, has been against. To be exact, by mid-last year, approximately $240 million had been generated through this tax and used for educational and other related purposes.[16] If these numbers continue at the pace they’re going, this gambling privilege tax could be a steady source of tens of millions of dollars for educational use in Tennessee each year for the foreseeable future.

Conclusion

            In conclusion, Tennessee, in deciding to legalize online sports betting for those within its borders, adopted a unique approach in handling the implementation of the legislation: 1.85% of the total amount of money wagered in the state would be collected via privilege tax. 80% of which would be for the use of building and maintaining local educational buildings. In doing so, the state has generated over a quarter of a billion dollars in just the last six years for educational uses. Moreover, due to sports betting’s wildly popular status in Tennessee, this seems to be a viable option for generating millions of dollars per year for years to come.

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[1] This blog is in no way an endorsement of sports betting or gambling of any type. If you or someone you know may have a problem with gambling, there are resources available to help. Contact the Tennessee Association of Alcohol, Drug & Other Addiction Services at (800-889-9789), the National Council on Problem Gambling at (800-522-4700), and Gamblers Anonymous at (626-960-3500).

[2] Sports Wagering Council Strengthens Rules, Regulations, Tenn. Sports Wagering Council (Apr. 8, 2025, 1:23 PM), https://www.tn.gov/swac/about/tennessee-sports-wagering-council-newroom/2025/4/8/sports-wagering-council-strengthens-rules–regulations.html.

[3] See generally Alexander Hall, Place Your Bets, Tenn. Bar Ass’n (June 25, 2019), https://www.tba.org/index.cfm?pg=LawBlog&blAction=showEntry&blogEntry=34804.

[4] See generally id.

[5] Scott McNutt, What’s Making Online Betting Big Business in Tennessee? Your Questions Answered, Haslam Coll. of Bus. (May 25, 2021), https://haslam.utk.edu/news/whats-making-online-betting-big-business-in-tennessee-your-questions-answered/.

[6] “Gross handle” refers to the total amount of money wagered. See Richard Smith, Sports Betting Terms Glossary – Betting Terms From A to Z Explained, readwrite (July 15, 2025), https://readwrite.com/gambling/guides/sports-betting-terms/#:~:text=In%20sports%20betting%2C%20a%20handle,the%20handle%20is%20%245%20million (“In sports betting, a handle refers to the total amount of money wagered on a particular event, market, or over a specific period. It’s the gross betting volume before payouts or winnings are deducted. . .”).

[7] Robert Fletcher, Tennessee Sports Betting Gross Handle Rises 21.7% in April, IGB (May 23, 2025), https://igamingbusiness.com/finance/tennessee-sports-betting-handle-april/.

[8] James Bisson, US Sports Betting Revenue & Handle: Tracking Betting Market Data 2025, Sportsbook Rev. (June 14, 2024, 4:14 PM), https://www.sportsbookreview.com/news/us-betting-revenue-tracker/.

[9] Eric Ramsey, US Sports Betting Revenue & Handle, Legal Sports Rep. (July 2, 2025), https://www.legalsportsreport.com/sports-betting-states/revenue/.

[10] Id.

[11] Tenn. Code Ann. § 4-49-104(a) (2025).

[12] Id.

[13] Fletcher, supra note 7.

[14] Subsection (f) of the statute gives the state treasurer some discretion in disbursement of funds to LEAs. See Tenn. Code Ann. § 4-49-104(f) (2025).

[15] Tenn. Code Ann. § 4-49-104(e)(1) (2025).

[16] Tori Gessner, Sports Betting Generates $236M for Tennessee Since Legalization in 2019, WJHL (June 13, 2024, 10:35 PM), https://www.wjhl.com/news/regional/tennessee/sports-betting-generates-236m-for-tennessee-since-legalization-in-2019/.