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Lawmakers: NY Sports Betting Tax Rate Here to Stay

Sportsbooks set up shop in New York with eyes open with the outlandish tax rate. Lawmakers are reluctant to tinker with the rate, but they may go along with letting promotional costs be charged off against revenues.

Lawmakers: NY Sports Betting Tax Rate Here to Stay

Bookmakers have bemoaned the 51 percent tax rate for New York sportsbooks since the day it was enacted, but the size and scope of the market was too good to pass up. Despite increased pushback in recent months, however, it appears that the nation’s highest rate isn’t going anywhere.

Here’s what a friend of the industry had to say at a regulatory hearing back in February: sportsbooks “knew it was 51 percent going forward. You negotiated it,” said State Senator Joseph Addabbo. “And now we have these numbers, and there’s no real foundation to say these numbers are suffering at this point.”

The state of New York has been enriched with nearly $825 million in tax revenue from $20 billion in bets placed. What’s to be woeful about? Yet sportsbooks complain. After a month of online sports betting, the New York Post reported operators probably lost $200 million.

For a time after the launch of online sports betting in January, 2022, lawmakers stood behind the sportsbooks over the tax issue. But each challenge failed. Now the supporters in Albany have become resigned to the inevitable.

“That’s not going to change,” Rep. Gary Pretlow told PlayUSA. “It’s not going to change ever, as far as I know. I can’t see it changing. It’s going to stay at 51 percent.”

Last year, Pretlow pushed for a bill to add online operators, which would trigger a lower tax rate, depending on how many signed on. But you don’t hear much about those efforts as the industry makes money despite the high tax.

In other words, you can stomp around all you want. It’s not gonna make a darn difference.

Addabbo introduced a similar plan in the Senate this year. While he holds out little hope for this bill or efforts to lower the tax rate, he didn’t say never.

“Never is a strong word because nothing in politics is forever,” Addabbo told PlayUSA. “But nobody has made a credible argument that lowering the tax rate is going to increase education funds. I don’t think a credible argument exists, but I’m all ears if someone wants to submit something.”

The high tax rate might force sportsbooks to cut back on promotional spending to retain existing customers and attract new ones, perhaps driving these customers back to the illegal marketplace or worse still, to New Jersey.

“My fear is that because of the early success that we’re going to wait and see,” DraftKings CEO Jason Robins said at the hearing. And when changes are made, it may take a long time to recover.

Christian Genetski, president of FanDuel, estimated that the New York handle could drop 20 percent year-over-year. Some sportsbooks may just leave the state. Genetski said a slight decrease of, say, 36 percent—similar to Pennsylvania, the state with the second highest tax rate—would help. “We believe that lowering the tax rate to one commensurate with the next-highest tax rate in the country can fundamentally alter the long-term outcome in New York,” he told officials.

During a business update last year, Gary Deutch, CEO of BetMGM Sportsbook NY, said the company cut back on marketing and promotional spending and put the money in states with better financial returns. The CEO of FanDuel’s parent Flutter, Peter Jackson, had a more poetic way of putting it—“lower levels of generosity.”

Of course, not all is lost in the great state of New York. Number 1 and 2 got a measured positive response when they begged legislators to let promotional spending—or at least a portion of it—count against taxable dollars, which in essence would reduce taxes.

Addabbo said there might be something they can do along those lines, and he may look into it sooner rather than later. “I was in favor of promotional credits,” he told PlayUSA. “That can be part of the discussion. That’s a little relief for some of the operators who then may do more marketing. That’s a good conversation to have post-budget.”