‘Can’t Make Money’ In NY Sports Betting, Says CEO Who Wanted License

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NY sports betting

Online NY sports betting operators are approaching $1 billion in gross gaming revenue, while the state is closing in on $500 million in tax revenue. 

However, Fanatics CEO Michael Rubin, whose company was turned down for a New York sports betting license, said he is happy to be left out of the Empire State.

“We’ll be in every major state other than New York, where you can’t make money, by next football season,” Rubin said last week at the Sports Business Journal World Congress of Sports.

Rubin once OK with NY sports betting

Fanatics applied for a New York license as part of a bid with Barstool Sportsbook. By rule, any applicant who submitted a final application agreed to pay the state’s 51% tax rate on online sports betting revenue proposed by operators.

Rubin’s comment seemingly echoed that of Barstool’s Dave Portnoy last year and was met with pushback from another sports betting company.

Tweeted SportTrade CEO Alex Kane: “Interesting. Were you aware of the tax rate when you applied to get into NY?”

Fanatics tried to lobby for a NY tax reduction, in addition to operators like FanDuel and DraftKings. So far, those efforts have been unsuccessful.

NY sports betting numbers in 2022

From Jan. 8 launch through Oct. 9, NY online sports betting operators combined for $957 million in total revenue onf $11.9 billion in handle, which has led to $488 million in tax funding for the state.  

Over the first five weeks of the NFL betting season, NY online sports betting operators averaged $314 million in handle.

For the week of Oct. 3-9, they combined for $43 million in total GGR (off $319 million in handle), the second-highest weekly total since Jan. 8 launch. 

Addabbo anticipates big October

“We were waiting with such anticipation for the start of football season,” Sen. Joe Addabbo told LSR. “Now that we’re five weeks in the numbers are dictating that it’s still a strong market — aside from the 51% (tax rate) — with great potential.” 

Addabbo noted those numbers could rise given the expanded menu of options open to sports bettors. Aside from the NFL, the MLB postseason is in full swing. In addition, the NHL regular season just started, with the NBA regular season tipping off Tuesday as well.

NY’s 51% tax rate remains talking point

Currently, the nine licensed online sportsbooks in NY are paying a 51% tax rate. All nine operators willingly agreed to the 51% tax rate when they entered the market. 

Yet many have complained that they aren’t making money as a result. Executives from FanDuel, DraftKings and BetMGM have been among those to lob criticisms. Various NY online sportsbooks have cut their advertising and promotional spend in the state. 

“Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose,” BetMGM CFO Gary Deutsch said in May. 

Sportsbooks can’t get tax reduction

Lobbying and legislative efforts at a tax reduction have thus far been unsuccessful. 

Assemblyman Gary Pretlow this year introduced a failed amendment that called for the Empire State to go from nine sportsbooks to no fewer than 14 by Jan. 31, 2023 (which would lower the tax rate from 51% to 35%) and no fewer than 16 by Jan. 31, 2024 (which would lower the tax rate from 35% to 25%.)

Any changes could potentially hinge on how much tax revenue the state brings in from online sports betting for FY2023 (April 1, 2022 to April 1, 2023). Gov. Kathy Hochul’s enacted budget projects $615 million. Through the first six months of FY2023, the number is at just over $307 million.

Pathway to NY sports betting tax change

Addabbo said the state would only consider a tax reduction if it made financial sense. As per the legislative language, 98% of tax revenue from online sports betting goes to educational funding. 

“We can’t adjust the tax rate if we see a reduction in educational funds,” Addabbo said. 

Addabbo, who is running for re-election in November, added the state would revisit the issue prior to next year’s budget process. 

“We’ll ask our legal counsel and fiscal analyst to take a look at it,” he said.