New York’s current tax matrix for mobile sports betting apps, could turn out to be bad news for Empire State bettors, warn sportsbooks. Operators who have debuted in the market have raised concerns about the high tax rate of 51%, and some of them caution that due to this fact, they might feel obligated to pump up the odds for sports betting wagers in the state.
The market officially kicked off operations in January 2022, and it accommodates a total of nine operators who are allowed to offer and accept online sporting wagers. It is safe to say that the market has been a success as in its first year it provided over US$900 million in tax revenue for the state. However, its operators are not happy with the steep tax rate.
This Week’s Hearing
This week, representatives of DraftKings and FanDuel participated in a joint hearing of the New York Assembly and Senate gambling committees to review the first year of mobile sports betting and its impact on the state budget. The two operators warned state officials that if the tax rate is not lowered then the success of the sector may not continue and see an increase in wagering odds.
President of FanDuel, Christian Genetski cited a report from Spectrum Gaming that the state’s sports betting handle will decrease by 10% to 20% on a year-to-year basis. He explained that operators will start to struggle with the tax and will reduce marketing and generosity but will be forced to adjust pricing in the Empire State to ensure a higher hold percentage.
State law also requires operators to include the value of free bets and other promotions in the tax ratio. According to the CEO of DraftKings, Jason Robins, this was an effective rate of more than 70% for sportsbooks. He also noted that operators are yet to take more drastic measures to have a go at the state’s administration, but they could reduce the value of promotional credits offered to bettors.
Furthermore, Mr. Genetski emphasized that operators believe that this level of the economic success of the market is not sustainable with the current tax rate of 51%. In his words, despite being a year old, the market has already demonstrated clear signs that it has already hit its prime, while other states remain on a solid upward trajectory.
Recently Proposed Legislations
However, it would be extremely difficult to get lawmakers on board with the idea of lowering the tax rate, believes Sen. Joe Addabbo Jr. The Senator recently launched legislation which if approved would increase the number of sportsbooks up to 16 in the state. In the meantime, it would also allow for a decrease in the hefty tax rate.
Meanwhile, other lawmakers are concerned about the effect of sports betting popularity on New Yorkers. This month, democrats Luis R. Sepúlveda and Leroy Comrie introduced Senate Bill S1550, which would require all gambling and sports betting commercials in the state to include warnings about a possible negative effect. Another requirement would be to have the New York problem gambling hotline number 1-877-8-HOPENY on display.
Source: Zochodne, Geoff “Sports Betting Sites Warn New Yorkers Could Get Worse Odds if Tax Rate Remains High” Covers, January 31, 2023