PITTSBURGH – The hope of some US sports betting operators to get a lower mobile NY tax rate appeared crushed Thursday in Pittsburgh.
Troy Mackey, the coordinator of the New York Assembly’s Racing & Wagering Committee, told the National Council of Legislators from Gaming States summer meeting the 51% NY sports betting tax rate will not be lowered.
“New York is doing extremely well and it’s one of those things that you cannot go back now, unfortunately, to reduce the tax rate,” Mackey said at the conference held at Rivers Casino. “We tried to revisit that and there was no justification, well, you couldn’t justify taking away money from education and giving it to a corporation. That is the argument we’ve been up against.
“So we tried to again put legislation out there to bring more entities into New York to reduce the tax rate hoping that would balance it out, in reference to reducing the rate with more entities involved. Folks at a higher pay grade than myself were totally against that.”
Lower NY sports betting rate was proposed
Mackey explained that 51% was not the original expectation when the mobile sports betting legislation was written. That rate ultimately came from former Gov. Andrew Cuomo, who wanted to replicate New Hampshire‘s market that taxes DraftKings 51% for its online monopoly.
“When we initially wrote the legislation for mobile sports betting in New York, we wanted to incorporate more entities,” Mackey said. “We wanted more entities involved and we wanted that tax rate to be around 37%. We thought that would have been a fair number.”
New York approved nine sports betting licenses in 2021. Shortly after the January 2022 launch, Sen. Joe Addabbo Jr. and Assemblyman Gary Pretlow wrote legislation that would have expanded the market to a minimum of 16 operators by January 2024.
The legislation died without much fanfare: “It turns out that you don’t tinker with something that’s successful and it may be premature,” Addabbo told LSR at the time.
NY sports betting taxes so far
New York’s nation-high tax rate led the state to be the first to make more than $1 billion in taxes from sports betting.
The state recently cleared the $2 billion mark in May. Compare that to New Jersey, which has taken $6.3 billion more in handle yet has made the state only $541 million over a longer timeframe.
Market leaders threatened worse odds
It took just one year for DraftKings and FanDuel to threaten changes if the tax rate the operators agreed to more than a year prior was not lowered.
That could include worse odds for New York bettors, fewer promotions and fewer dollars spent on marketing deals with professional sports franchises in the state, DraftKings CEO Jason Robins told legislators in January 2023.
“It was a different time and a different market,” Robins said. “Operators, who were understandably excited about New York opening up, were focused far more on customer acquisition in the short term and far less on what would create sustainable market over time. …
“But the most draconian decisions — the actions that operators will likely need to take to make New York sustainable under the current tax regime — still have yet to occur.”
Could NY sports betting see worse odds?
Both DraftKings and FanDuel could afford to offer worse odds in some cases to offset higher taxes, according to Barry Jonas of Truist.
The “superior products” offered by the two leaders, as well as their scale, means they can “tweak pricing,” he said. Handle could slip on those changes but those operators chasing the leaders have “product gaps,” Jonas added.
The conversation on worse odds sprung back to life after Illinois approved a change in its 15% tax rate, setting a scale up to 40%. Illinois is the second state to raise betting taxes in as many years after Ohio doubled its tax rate to 20% in its first year of operation.
Not every state is on board with increases. The New Jersey legislature did not entertain a bill that would have more than doubled the rates on mobile betting and iGaming to 30%.
