Remember when New York was preparing to launch legal online sports betting almost four years ago? When state regulators first confirmed that the tax rate would stand at a whopping 51% of revenue?
Operators weren’t happy with it. Many spoke out against it. Some claimed that no sportsbook would even make money. Lawmakers made attempts to lower the rate, to no avail.
And it doesn’t look like that tax rate will ever change, according to Troy Mackey, it might never be lowered.
Speaking at the National Council of Legislators from Gaming States summer meeting in Pittsburgh, Mackey highlighted how well NY sportsbooks have fared since launching in January 2022. And, in turn, how much the state has benefitted from a steep tax rate.
“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, a member of the NY Assembly Racing and Wagering Committee, said at the conference, as reported by Legal Sports Report. “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.”
Lawmakers have tried to set a lower NY sports betting tax rate
For a brief history lesson: The 51% tax rate was perpetuated by then-Gov. Andrew Cuomo, who had long opposed the legalization of online sports betting but acquiesced nonetheless.
However, as Mackey explained during the conference, lawmakers actually targeted a lower tax rate. They wanted more operators to open up shop in New York, and legislators believed 37% “would have been a fair number.”
Of course, that’s not what happened. The state ultimately settled on 51%.
Sen. Joseph Addabbo and Assemblyman Gary Pretlow attempted to lower that rate in the past few years. One such effort involved introducing a bill amendment that would decrease the tax rate to as low as 25% by allowing more sports betting operators in New York.
Of course, attempts such as this never made much headway. And the 51% rate remained.
Many have spoken about punitive nature of tax rate
Since New York first made it clear of the sky-high tax rate, many individuals have come forward to speak out against it.
Many sports betting operators have lambasted the tax rate, including the likes of heavy-hitting FanDuel Sportsbook NY and DraftKings Sportsbook NY.
As recently as early 2023, Christian Genetski of FanDuel and Jason Robins of DraftKings told Assembly Racing and Wagering Committee members that the high rate has stunted the growth of the New York sports betting market.
Genetski shared that betting had declined by 20% since the industry launched in January 2022. Robins added that New Jersey, then nearly five years old, was outgrowing the Empire State. Both indicated that, if the tax rate was not lowered, their respective sportsbooks may have to begin offering “worse odds” compared with other states to remain profitable in New York.
These statements came several months after Brandt Iden, then the head of US government affairs for Sportradar, pointed out that sportsbooks “are not profitable in New York.” About the 51% tax rate, he added: “It just doesn’t work.”
New York cleaning up with tax revenue
The Empire State has certainly benefitted from the 51% tax rate.
Since launching in January 2022, sportsbooks have paid nearly $2.1 billion in state tax revenue – by far the most in the country. The next-highest total comes from Pennsylvania, with a 36% rate and launched in 2019, with just over $615 million. New Jersey, which has had online sportsbooks since 2018 and taxes them at a 13% rate, has totaled $541 million.
That said, the New York industry has set records for gross revenue. In the two-plus years of online operations, NY sports betting revenue has exceeded $4 billion – No. 1 among US jurisdictions.
Of course, that total is dominated by FanDuel and DraftKings, who have combined for $3.25 billion, reflecting a massive 79.8% share of the New York market.
The other seven operators have combined for $819.3 million, a total mostly dominated by Caesars Sportsbook NY ($423.7 million) and BetMGM Sportsbook NY ($215.6 million).
