Sen. Joe Addabbo has introduced a bill that would increase the number of online NY sports betting operators, resulting in a tax reduction, as a way to start the conversation,
Under Bill S1962, the Empire State would have no fewer than 14 online New York sports betting operators by Jan. 31, 2024, and no fewer than 16 operators by Jan. 31, 2025.
NY made $909 million in revenue in its first full year of legal online sports betting, so it would be a daunting challenge convincing legislators to decrease the lucrative 51% tax rate.
Why Addabbo introduced bill
Addabbo explained to LSR why he introduced the bill.
“It’s a starting point for negotiations in this brand new legislative session on the cusp of the state budget,” Addabbo said Tuesday night.
“The industry or Senate or Assembly has to make a credible argument that increasing the number of operators or decreasing the tax rate makes fiscal sense by increasing revenue and education funds. Somebody is going to have to make that argument.”
Pretlow tried similar bill and failed
Assemblyman Gary Pretlow introduced similar legislation, which was matched by Addabbo, last session. But that bill failed to advance.
Pretlow previously told LSR he expected the tax rate to stay put.
“I tried to make it go away because I thought (the tax rate) was exorbitant,” Pretlow said in late December. “But the operators are doing it, so I’m not going to take from education for them to make more money. So I’m pretty sure it will (stay).”
NY sports betting tax rate complaints
New York currently has nine operators that pay a 51% tax rate. Executives at top-performing sportsbooks FanDuel, DraftKings, Caesars and BetMGM have publicly complained about the tax rate.
“Well, the tax rate is ridiculous,” Caesars CEO Tom Reeg told LSR in November.
Granted, they willingly proposed and agreed to accept that rate in exchange for access to the NY market last year.
NY tax rate, license fee changes
Under the bill amendment:
- 10-12 operators would mean a 50% tax rate
- 13-14 operators would mean a 35% tax rate (2024)
- 15 or more operators would mean a 25% tax rate (2025)
The initial nine operators paid a $25 million licensing fee before entering the market. But new entrants, per the bill language, would pay a $50 million licensing fee. The increase is the result of joining a successful market as opposed to a fledgling one, dating back to Jan. 8, 2022 launch.
What operators might be interested
Still, a tax reduction would seemingly be intriguing to operators who didn’t make it into the final nine. Bet365 was the first operator left out, while a joint bid from Fanatics Sportsbook and Barstool Sportsbook was unsuccessful.
Rapidly expanding Fanatics previously tried to lobby for a NY tax reduction, in addition to established operators FanDuel and DraftKings. Thus far, those efforts have proven unsuccessful.
NY sports betting haves and have-nots
From Jan. 8-Dec. 31, 2022, FanDuel, DraftKings, Caesars and BetMGM had combined for 93% of the market share and 96% of the revenue share.
It is unclear how any sportsbooks leaving the market, or being acquired via M&A, would affect expansion efforts.
NY sports betting menu to increase?
Pretlow has shown a desire to increase NY online sports betting offers to include individual award future bets like MVP, Cy Young and Coach of the Year.
But it is also unclear whether the legislative language would have to be changed to accommodate that expansion. If so, it would mean a three-year process.
Also on the agenda for legislators is potentially adding betting kiosks at stadiums and arenas as well as to restaurants and bars.
Addabbo is also planning on reintroducing a bill that would legalize online casino gaming.
