Lawmakers Call for Reduced Tax Rates for Online Sportsbooks in New York

SBNY » Lawmakers Call for Reduced Tax Rates for Online Sportsbooks in New York

When the Empire State legalized online sports betting in New York, they hoped it would be a success. But it may have just surpassed all expectations.

New York Governor Kathy Hochul revealed this week that the state has generated $250 million in tax revenues, following some impressive figures in the first six months since New York operators launched. There have been $6.9 billion in bets handled, creating a massive $491.3 million in gross gaming revenue for the state’s legal sportsbooks.

A Controversial High Tax Rate

One of the core reasons that New York has managed to generate such large numbers in regards to tax revenue is that it operates with an industry-high tax rate of 51%. The only state to top those tax revenues was Pennsylvania, which did so while charging licensed operators a much lower 36%.

The high tax rate hasn’t been without criticism. In fact, some operators have even described the tax environment as “unsustainable”.

And there are now calls for a tax reduction, led by the sportsbook operators in New York. DraftKings CEO, Jason Robins, has been lobbying for lower tax rates for some time but has been unsuccessful in every attempt. BetMGM CFO, Gary Deutsch, explains why one is needed so badly, stating:

“Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”

Gary Deutsch, BetMGM CFO

But Rich Azzopardi, a spokesman for Governor Andrew Cuomo, didn’t seem to think it will happen any time soon:

“From the beginning, we sought a structure that benefited taxpayers while the industry and the legislative representatives fought us tooth and nail in order to reap more of the profits for themselves. They said it wasn’t going to work, but the proof is in the score — Taxpayers 1, Hacks 0.”

No Industry Standard

The problem for operators is that in each of the thirty states that now have legalized online sports betting, each one gets to legalize, regulate and tax sports betting markets in any way they see fit. So there isn’t an industry standard across the board, like in other countries.

Just to show how varied the differences are between states, here is a list of a few different states’ tax rates, from lowest to highest:

  • Iowa – 6.75%
  • Michigan – 8.4%
  • South Dakota – 9%
  • Pennsylvania – 36%
  • Delaware – 50%
  • Rhode Island and New York – 51%

Until an industry standard is introduced, it is likely that tax on online sports betting markets will continue to be a hotly disputed topic.

New York State Assembly
New York State Assembly

Potential for Change

While disagreement remains, some lawmakers have begun to swing toward lowering rates in New York. The first instance came when Senator Joe Addabbo, alongside Assemblyman Gary Pretlow, attempted to introduce a bill that would lower tax rates, but also try to guarantee the same level of income by allowing additional online sportsbooks to launch.

The bill was shot down, and, sadly for operators, the plans for lower tax rates on sports betting activities online were halted. But it does demonstrate a willingness of lawmakers to lower taxes if they can sustain the revenue generated thus far. 

There is still time for change to tax rates in New York, though, with the New York legislature still open until June 10th. This only leaves enough time for one more attempt, but any such effort would be welcomed by online sports betting operators who want to see their profits increase.

With the amount tax revenues have generated for the state, it will be tough to win over voters to pass the bill through the legislative process. In order to succeed, a feasible proposal will need to be made that sees both sides win without compromising on regulations already in place.

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