Assemblyman Gary Pretlow and Sen. Joe Addabbo Jr. want to see more operators in the NY sports betting market – but not at the risk of tax dollars.
Introduced last week, Pretlow’s A 8658 and Addabbo’s S 8471 would allow more mobile sportsbooks to enter New York, at a hefty price. Platform providers would have to pay the same $25 million as called for in the RFA through which the nine approved operators won their licenses last year.
One stark difference is a $50 million license fee for the operator, but that might not be enough to make up the difference in tax revenue. Adding new operators means a lower tax rate for NY sportsbooks and potentially fewer tax dollars for the state.
How many new sportsbooks could come to NY?
The bill calls for no fewer than 14 operators by Jan. 31, 2023, and 16 sportsbooks by Jan. 31, 2024.
With nine operators already approved, an additional seven operators would bring in $525 million in fees if all seven paid the maximum $75 million for its license and platform fee.
Both failed bidders and sportsbooks that did not show interest in the RFA can apply by Sept. 1, 2022. The bill also calls for at least two organizations with qualified minority investment.
No deal if taxes fall
Addabbo said it would not be a prudent decision to move forward if it meant fewer dollars for education. That fiscal outlook will become more clear as staff from the Assembly, Senate and governor’s office work together on the math of the proposal.
“We shall see,” Addabbo said. “We’ll see over the next two weeks or so whether it has traction or not.”
Considering the bill asks for the same tax rates as determined by the RFA, adding seven total licenses will lead to a steep drop in the tax rate paid by sportsbooks. The tax rate would fall to 35% with 14 operators and 25% with 15 or more, a far cry from the current 51% rate.
No discussion on just lowering sports betting tax yet
DraftKings CEO Jason Robins said he has heard chatter about lowering the tax rate in New York.
That is not happening without adding more operators, Addabbo said.
“If by including other operators there’s a reduction in tax rate, so be it – but alone we can’t talk about the tax rate,” Addabbo said. “I’m sorry. Operators negotiated that, the state was very clear from day one, very transparent, that they wanted 51%.
“So it is way too premature, way too early, to talk about a straight reduction in the tax rate. I won’t do it.”
Other changes would also lower NY sports betting taxes paid
Also lowering the tax dollars paid is the line that allows promotional dollars to be deducted from taxable revenue:
“Sports wagering gross revenue” means: the amount equal to the total of all sports wagers not attributable to prohibited sports events that a casino or mobile sports wagering licensee collects from all sports bettors, excluding wagers placed with promotional wagering credits or other things of value…
Sportsbooks could also carry losses for a year:
In a month when the amount of sports wagering gross revenue for a platform provider is a negative number, such platform provider may carry over the negative amount to the return filed for the subsequent month. However, no amount shall be carried over for a period of more than twelve months after the month in which the amount carried over was originally due.
If those kind of policies were in place for the launch month in January, New York would have seen a much lower tax total than $63.2 million. Even BetRivers online betting, which launched with the lowest promo offer on the market when sportsbooks went live Jan. 8, said it will likely report negative revenue from New York in the first quarter.