Last updated: February 08, 2023
Following an unsuccessful hearing to lower the state tax rate for mobile sports betting operators in New York, the outlook for The Big Apple’s gambling landscape looks to be pretty bleak for 2023. At current, online gambling operators are stumped with a tax rate of 51% on gross gaming revenues, making New York the state with the second-highest tax rate in the country.
Operators called for lawmakers to reduce the tax burden by either granting additional licenses to mobile operators, allowing tax deductions on promotions, or lowering the state’s tax rate entirely.
The USA’s leading sports betting operators, FanDuel and DraftKings, both spoke out at the hearing, with FanDuel’s President Christian Genetski conveying to the committee that the reason for the underperformance is due to a “pull back of investment by operators in the market.”
Jason Robins, CEO of DraftKings, also stated reasons why operators in NY are not coping well with the tax burdens and the impact they are having on businesses. He said that the fact that the state’s tax obligations do not permit operators from making promotional credit deductions means that, in reality, the 51% tax rate is closer to 70%.
Despite this figure giving operators strong grounds for argument, lawmakers were apparently still not convinced. Robins and Genetski then hinted that consumers would end up bearing the burdens if lawmakers refused to change the status quo. This would be reflected in fewer promotional credits, cuts to advertising initiatives, and worse odds on sports wagers.
Assemblyman Gary Pretlow looked at this statement as an outright threat and said that if this “collusion” were to take place, the Attorney General would need to step in. Nevertheless, some members of the Assembly are on the other side, one of which is senator Joseph Addabbo Jr.
Addabbo recently introduced a bill that could bring the existing 51% tax rate down to 35% if the number of state operators were to go from 9 to 14 by 2024 and further reduced to 25% if the number were to reach 16 by 2025.
If the tax rate were to come down to 35%, it is estimated that the Treasury would be looking at losses of more than $600 million in tax revenue each year. However, one of the committee members commented that in the long term, lowering the existing rate would put New York on a much safer and better trajectory to making the market more appealing to potential operators.
While online casinos aren’t yet legal in New York, Robins also made a point of saying how online casinos in the US aren’t subjected to the brutal tax rates that sports betting operators are, despite them generating significantly higher revenues and not having the same “baggage” when it comes to promotional deductions.
“States like New Jersey, Connecticut, and Pennsylvania have authorized iGaming,” Robins said at the hearing. “And results have shown that iGaming’s success can come without cannibalizing existing retail gaming operators or the lottery, and certainly without experiencing the hyperbolic, doomsday scenarios that many opponents recklessly predict.”
Mobile sports wagering may have only been live for a year, but in that time, the state’s operators have handed over more than $909 million in both tax and licensing fee revenues. This comes as a result of the 3.8 million player accounts that were created at the state’s 9 sportsbooks, along with the 1.2 billion separate sports betting wagers that were placed on more than 20 different sports ranging from major league football to snooker.
Online wagering for horse racing hasn’t yet been legalized, though new legislation is pending to allow for mobile platforms to offer thoroughbred wagers.
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