High New York Sports Betting Tax Rate Is Here To Stay. What That Means Going Forward

Written By Matt Boecker on May 4, 2023
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Despite legal efforts to lower it, New York’s 51% tax rate on sports betting is here to stay. And bettors are already feeling the pain.

Representatives from NY sportsbooks have been vocal about their desire to lower the punitive tax rate. In February, executives from DraftKings Sportsbook and FanDuel Sportsbook met with lawmakers to discuss lowering the rate.

The pair told lawmakers that getting the sportsbook tax rate down to 35% would allow DraftKings, FanDuel and other NY sports betting operators to avoid taking dramatic cost-cutting measures. We’re now about three months removed from that meeting and the tax rate remains at 51%, with good odds it stays there for the foreseeable future.

While the sportsbook tax rate seems like a thing that will only impact lawmakers and gaming operators, New York sports bettors could face negative consequences, too. And some have already begun taking place.

High tax rate means less NY sports betting promos

Sports bettors are always on the lookout for promotional offers. But NY sports bettors get less of them compared to other markets.

This is due to the high sportsbook tax rate — operators are cutting down on promotional offers to save money. BetMGM Sportsbook NY started doing it last year, and CEO Gary Deutch was blunt when explaining why.

Deutch said bettors “would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”

So BetMGM opted to direct promotional spending away from New York and toward markets that offer “better economic returns.”

NY sportsbooks may offer “worse odds”

In that February meeting with lawmakers and sportsbook executives, DraftKings CEO Jason Robins warned that gaming operators may begin offering “worse odds” if the 51% tax rate isn’t reduced. By giving worse odds, sportsbooks would provide smaller payouts on winning wagers.

Robins knows sportsbooks check the lines offered by competitors. He told lawmakers once a few sportsbooks give worse odds, the others in the NY market would do the same.

Robins realizes this would result in New Yorkers taking their sports betting action elsewhere. Either to neighboring states offering better odds, or illegal markets. But it’s apparently a risk he’s willing to take.

“My fear is that because of the early success that we’re going to wait and see,” Robins said, “and by the time we see, it might be some of the loss and revenue, and the loss in customers back to the illegal market might take a long time to recover even if we did make a change, even if you all did make changes at a later date.”

Fewer sportsbooks partnering with teams

Robins and FanDuel president Christian Genetski expressed how expensive it is for sportsbooks to have partnerships with professional teams. So the high tax rate puts “meaningful” deals with teams and venues in jeopardy.

This wouldn’t impact NY bettors directly, not like fewer promotional offers or worse odds. But less sportsbook advertising with teams means fewer new user sign-ups at sportsbooks, which would lead to less money being wagered in the New York market.

So sportsbooks cutting partnerships with teams and stadiums will only hurt the New York sports betting market. This will lead to NY sportsbooks continuing to limit promotional offers, and it could make worse odds a reality.

In late March, it was announced that Bally Bet NY would wnd its partnership with the New York Yankees. While this was largely due to Bally’s largest owner, Diamond Sports Group, declaring bankruptcy, the high NY sportsbook tax rate certainly didn’t help save the partnership with the Yankees.

Bally Bet is active in five other markets outside of the Empire State.

Why aren’t lawmakers lowering the sportsbook tax rate?

It seems logical that New York lawmakers should work with sportsbooks on lowering the tax rate if it negatively impacts bettors. Especially considering Sen. Joe Addabbo, a driving force for legal gambling expansion, noted that he would consider pushing any proposal that would benefit customers as well as the state.

That said, the New York sports betting market is still very profitable for the state.

In January, New York’s online sports betting handle stood at $1.788 billion. Then in March, sportsbooks accepted $1.785 billion in wagers. Both represent record amounts across the US sports betting landscape.

Since mobile sports betting launched in January 2022, New York has surpassed $1.5 billion in monthly handle eight times. Five of those happened in the last six months. The biggest number, though, is tax revenue for the state, which has surpassed $900 million since going live.

So online sports betting is still booming in NY despite fewer promotions and the risk of worse odds. Until sports betting figures begin to take a dive, lawmakers won’t feel any urgency to lower the 51% sportsbook tax rate.

Photo by PlayNY
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Matt Boecker

Born in Oak Lawn, Illinois, Matt graduated from Northern Illinois University, where he covered NIU hockey for the Northern Star. Since then, Matt has specialized in NFL and NBA coverage for various websites and podcasts before shifting gears to casino and sports betting coverage.

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