Tax Rates Still a Hot Topic for New York’s Sports Betting Industry as Handle Breaks $3bn Barrier

SBNY » Tax Rates Still a Hot Topic for New York’s Sports Betting Industry as Handle Breaks $3bn Barrier

The New York State Gaming Commission has confirmed that sports bettors within the Empire State wagered $3.16 billion across all sports markets between January 8 through to the end of last month. The legalization of mobile-only sports betting came just in time for the NFL postseason and the subsequent Super Bowl on February 13.

FanDuel’s licensed mobile sportsbook handled more than $1 billion ($1.07 billion) alone between January 8 and February 27. By the end of last month, seven of the state-approved operators were live in New York state, with the likes of BetMGM, PointsBet, and WynnBET joining established sportsbooks such as DraftKings, FanDuel, and Caesars Sportsbook.

March Expected to be Just as “Mad” in Wagering Terms

With mobile wagering continuing to rise at pace in New York state, the attention is already turning to the next headline event on the US sports calendar – March Madness. College basketball’s biggest men’s and women’s competitions are a big deal throughout North America, particularly among those interested in watching the next top prospects to graduate from the NCAA to the NBA.

basketball players playing
Source: Piqsels

March Madness is scheduled to commence from March 15 at numerous locations statewide. It culminates in the “Final Four” contests slated to be held at the Caesars Superdome in New Orleans. All of this means that March is almost certain to maintain the momentum in New York’s sports betting handle built up in the last six weeks.

Joseph P. Addabbo Jr., the New York State Senator, agrees that wagering volumes are certain to hold firm in the coming weeks. Mr. Addabbo believes even post-March Madness the industry already has a healthy outlook, describing the Empire State as the “sports capital of the world”.

With $3.16 billion wagered between January 8 and the end of last month, the New York state economy was boosted to the tune of $104.3 million in tax revenue during this period. The Empire State boasts the highest tax rate of legalized sports betting throughout the US, with an unprecedented rate of 51%. This figure has become a bone of contention among lawmakers and online sportsbooks operating within New York state.

Sustainability the Issue for Licensed Sportsbooks in New York State

State Assemblyman J. Gary Pretlow, a strong advocate for licensed and regulated sports betting in New York, believes the tax rate should be cut imminently. Pretlow was in discussion with Assemblywoman Michaelle Solages as part of an episode for the New York State Black, Puerto Rican, Hispanic, and Asian Legislative Caucus Twitter Space. He could not hide his displeasure at the way some areas of New York’s fledgling sports betting arena are panning out.

Empire state building
Source: Piqsels

Pretlow reiterated the fact that New York’s 51% tax rate is the highest in the US sports betting industry. Amid his discussion with Ms. Solages, Pretlow revealed he had recommended “various pieces of legislation” designed to reduce the 51% tax rate, whilst helping the industry become “more inclusive” to state citizens. Pretlow’s argument is that a considerably lower tax rate would encourage more online sportsbooks to serve sports bettors in the Empire State, whilst growing jobs in the sector, and underpinning New York’s sports betting market.

With a lower tax rate and a bigger base of mobile sportsbooks, Pretlow predicts that aggregate tax revenues in New York would be similar “if not more” than the current income generated. Pretlow was also critical of the New York State Gaming Commission’s decision not to hand out licenses to any minority-controlled sportsbooks. Fanatics Sportsbook, which is part-owned by rap icon Jay-Z, was turned down for a mobile sports betting license.

Pretlow suggests that New York should look to adopt the same model that’s proven successful in the neighboring state of New Jersey, where up to 40 online sportsbooks are permitted. Pretlow revealed that he and State Senator Addabbo originally requested a maximum of seven skins per land-based New York casino. This would have resulted in up to 25 active mobile sportsbook operators for New Yorkers to choose from.

Pretlow also believes the New York State Gaming Commission should weigh up slashing the licensing fee, which currently stands at $50 million. Pretlow suggested that be cutting it in half would open the New York market to “boutique”, independent sportsbook operators that may offer something different to bettors.

Established Operators May be Forced to Reduce the Competitiveness of Their Odds

Even the biggest mobile sportsbooks operating in New York admitted that the 51% tax rate is leaving them hamstrung. Jason Robins, the chief executive of DraftKings, admitted that the Empire State’s tax revenue regime “makes it hard” to generate a profit compared with other states “with lower tax rates”.

Robins claims that this seismic tax on gross revenue is being increasingly viewed as fool’s gold. He intimated that if the tax rate remains the same, the operator would be forced to slash its NY-based marketing budgets, as well as its promotional offers such as free bets which are also taxed at the same rate. This was a relatively unknown development until New York Yankees owner Randy Levine revealed that marketing activity such as free bet promotions was “also absurdly being taxed” by the New York State Gaming Commission.

It’s also possible that DraftKings may be forced to reduce the competitiveness of their sports betting odds by increasing their margins to cover their costs.

Although Pretlow intimated that State Senator Addabbo was keen on increasing the competitiveness of New York’s sports betting market from the outset, Addabbo insists the 51% tax rate is “going to stay the same”. He said that the operators “understood” what they were getting themselves into when applying for a license in the Empire State.

In terms of the sportsbooks being forced to increase their margins to compensate for the extortionate tax rate, Addabbo implored operators to “make their intentions known” in the coming weeks to enable the Gaming Commission to “offer some solutions” before the closure of the 2022 state budget.

The remaining two mobile sportsbooks to obtain a license from the Gaming Commission are expected to launch later this year. BallyBet is slated to open its doors to mobile users in the first half of 2021. Meanwhile, the Genting Resorts World platform is already approved to accept mobile sports wagers as soon as Resorts World is fully operational offline in the Empire State.

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