The state of New York has quickly become a leader in the sports betting industry. After just five months of operations via mobile gaming, the industry has seen a huge increase in tax revenues and the number of sports bets placed via devices like smartphones and tablets. While revenue reports have been high, we are now going into the summer slowdown for sports betting. Will the lack of betting opportunities negatively affect the industry?
In addition, there’s a significant effort by operators to push for a lower tax percentage than the existing 51%. This is because the rate is high when compared to other states in the industry and is ultimately affecting how NY operators can do business.
From Success to Slowdown
Within six months, New York sports betting operators have seen $267 million in tax revenues paid from sports betting. The majority comes from mobile betting to the tune of $263 million. It’s clear that players have been using the mobile option at a record pace, betting on their favorite teams and players. Incredibly, over $490 million in gross gaming revenues were reported by operators in the first half of the year.
Mobile betting has far surpassed the four commercial casino’s earnings, with the venues bringing in just $4.3 million in revenues by the end of May. The difference shows that players are willing to post bets more often via mobile devices than travel to a land-based venue, further supporting the need for mobile services in a sports betting market to truly succeed.
While the numbers have been high as of late, the industry will now experience a summer slowdown. The summer months are slow in general for the sports betting industry and the NBA season is over, so there is no more opportunity for players to wager on professional basketball games.
The MLB is close to the midway point of its season, and there is Formula 1 racing, but these sports do not garner the same number of wagers as the NBA and NFL. The next professional football season does not begin until September, so it leaves several months when operators may experience a drop in earnings.
It will be interesting to see how the industry fairs over the next few months and if operators will begin to feel a strain due to less player participation.
High Tax Rate Becomes an Issue
Speaking of strain, New York sports betting industry operators are struggling due to the state’s high tax rate. Each operator must pay a 51% tax rate for a ten-year period. This is extremely high when compared to other states. On average, the amount paid in the US is around 19%.
Providers such as FanDuel and DraftKings are asking lawmakers for legal changes to lower the tax rate percentage. Many are already cutting back on promotional offerings because the state taxes promotion revenues.
Operators can provide bettors an incentive such as a free bet to bring traffic. In most states, operators are allowed to subtract promotional offers from revenues, but not in New York. The state considers the amount in the earnings of the sportsbook, even if no money exchanged hands. This cuts down on the promotional opportunities that operators want to provide to avoid paying higher taxes in the state.
The potential for earnings in New York may be severely undercut if operators decide to stop offering promotions. Players will still participate in sports betting, but most seek to join online operators that offer quality welcome deals and other incentives.
We shall see in the coming weeks if lawmakers respond and if any potential legal changes will take place to even the playing field for operators regarding the sports betting tax rate.