New York Sports Betting Operators Argue for Lower Tax Rate

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A general view shows Central Park and the Manhattan skyline from the One Vanderbilt viewing deck in New York City. Ed Jones/AFP

The Empire State has proven to be the most fertile sports betting market in the nation, but an onerous 51% tax rate on gross gaming revenue is tied for the highest in the United States.

After a full year of mobile betting in New York, the online sportsbooks insist the rate is too high and without a decrease, there could be dire consequences.

Shaky Ground

Despite the highest online betting handle in the nation, the New York sportsbooks are crying foul only a year after agreeing to the legislature’s terms. The 51% kickback to the state is tied with New Hampshire for the highest in the country, coupled with exorbitant licensing fees and restrictions on writing off promos and other deductions, the books declare it has become an untenable situation.

Many of the platform providers stated at a recent hearing hosted by state Sen. Joe Addabbo and Assemblyman J. Gary Pretlow, chairmen of their chambers’ respective gaming committees, that New York’s booming first year of mobile sports betting is hardly an indicator of future returns. They believe the novelty will eventually wear off and market saturation may ultimately see decreases in the overall handle, and thus the revenue.

Jason Robins, CEO of DK, stated, “It’s far too early to declare victory. The market is built on an unstable foundation.”

The president of another major player in the New York market said, “We want New York to be the beacon of this industry and it can be, but the big early tax revenue numbers, not to mention the consumer safeguards expanded to New Yorkers, will prove to have been a fleeting achievement if we do not change the course for the long term.”

Ominous Trends

The debut of sports betting in New York was an unmitigated success with over $16.1 billion being wagered, yielding a gross gaming revenue of $1.36 billion. However, the online operators’ biggest quarter was the first, in which 30% of the bets were placed.

However, in the fourth quarter, normally the highest with the NFL, NBA, and NHL all in full swing, New York’s books took in 29%, which is anomalous to virtually all of the trends in other states.

David Isaacson, senior vice president of Spectrum Gaming, a gaming industry consulting firm, stated, “We believe this is happening because operators are pulling back on promotional spend in this market. They’re more focused on their bottom line relative to the promotional blitz we experienced in Q1. We expect that under the current tax structure, operators will continue to limit promotional spending. So, in year two it is possible that the New York market could actually decline in terms of overall wagering volume, putting the state’s tax revenue at risk.”

State Sen. Joe Addabbo, a vocal proponent of sports betting from the beginning, has introduced SB 1962, which would expand the number of sportsbooks in the market and decrease the tax burden on a sliding scale. The proposal looks like this:

  • 4-5 sports betting providers – 64%
  • 6 sports betting providers – 62%
  • 7 sports betting providers – 60%
  • 8 sports betting providers – 58%
  • 9 sports betting providers – 51%
  • 10-12 sports betting providers – 50%
  • 13-14 sports betting providers – 35%
  • 15 or more sports betting providers – 25%

But not everyone is shedding a tear for the sportsbooks.

“I have to say color me skeptical, and I only say that because I think there will be a natural cap on the number of people who will engage in mobile wagering,” New York Assemblywoman Carrie Woerner responded. “To recover $600 million is a big jump. I’m no fan of high tax rates, but I think this is a leap.”