Tennessee Sports Betting Goes Live As Taxes & Hold Requirments Favor BetMGM, DraftKings …

With sports betting now live and running in Tennessee, seven operators now fully engage in the mad dash for market share in the nation’s newest jurisdiction. However, the playing field might not be as even that in other locations, as www.odds.com tells Forbes that the tax rate is a barrier to entry that works in the favor of MGM, FanDuel and DraftKings. Big players will gain market share in the state while being less concerned about early profit.

BetMGM, DraftKings, FanDuel and Tennessee Action 24/7 all had their products on proud display Sunday morning as bettors raced to lock in their first legal bets. Operators William Hill, BetAmerica and the Wynn Sportsbook were all left sitting on the sidelines as their license applications are pending approval..

As Bill Colleoni of Odds.com points out, the state’s decision to impose a 20% tax on all gross gaming revenue immediately cripples the potential for smaller operators to remain as competitive as those who already benefit from profits outside of the state.

As the name states, Tennessee Action 24/7 enters the landscape with the unorthodox strategy of focusing solely on the Rocky Top clientele. The brand’s boast of being the line “only rookie bookie” and the lone brand locally owned and operated in the state might bode well with clients, but could also handicap their ability to go toe-to-toe with the deeper pockets of their competitors.

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David only defeats Goliath if he has a stone to throw, and the 20% tax, coupled with other financial requirements to operate, leaves the smaller Action 24/7 group at a severe disadvantage.

Licensees are already subject to an annual $750,000 fee and further required to purchase official league data from the leagues themselves if they wish to offer any live, in-game wagering options.

Colleoni views this fee and the 10% hold requirement as a major stumbling block for those looking to get off the ground.

“With Tennessee requiring a 10% minimum hold rate, sportsbooks will have to take in $7.5 million in bets each year just to be allowed to stay in business. More established brands, like DraftKings, FanDuel and MGM are more equipped to absorb these costs and push through the early uphill battle in establishing a firm share of the local client base.”

“Their ability to work on smaller margins, or even with early losses, allows them to be more aggressive with marketing to a point where they could potentially snuff out smaller competitors by simply outspending them.”

Partnerships have long served as key marketing strategies for both FanDuel and DraftKings, but it was BetMGM who managed to ink a deal with the state’s lone NFL team, the Tennessee Titans.

In doing so, BetMGM receives branding and promotional exposure across all of the team’s digital assets, along with in-game exposure to fans.

While the rocky road to the official launch in Tennessee saw its share of controversies, the decision to stick to the 20% tax rate could end up crippling the only local brand in the mix.

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