Punitive 51% Tax Rate Stunting New York Sports Betting Growth Say Operators

Written By Matt Boecker on February 10, 2023 - Last Updated on February 17, 2023
FanDuel and DraftKings predict industry decline if lawmakers don't lower the tax rate on New York sportsbooks to 36%.

Gaming operators say they are having a tough time in the New York sports betting market due to the high tax rate. And things could get worse if lawmakers don’t implement change.

Last week, the Committee on Racing, Gaming and Wagering held a meeting with the heads of DraftKings and FanDuel. Legalizing NY online casinos was a major talking point. Another major issue was New York’s 51% tax rate on sports betting operators.

FanDuel president Christian Genetski and DraftKings CEO Jason Robins told the committee the high tax rate has stunted the growth of the NY sports betting market.

Genetski told lawmakers betting has declined 20% following the first three months of sports betting’s launch in January 2022. Robins said the New Jersey market is outgrowing New York’s, despite sports betting launching in the Garden State four years ago.

FanDuel, DraftKings want tax rate reduced to 35%

Both men pitched the idea of lowering the tax rate on sports betting to 35%. They said that rate would allow FanDuel NY Sportsbook and DraftKings NY to avoid taking extreme measures to stay profitable in New York.

A few days after the pair met with lawmakers, New York Senate Bill S1962 was introduced. The bill promises to increase the minimum number of sports betting operators to 12 by Jan. 31 2024, and no fewer than 15 by Jan. 31 2025.

If there are 10-12 operators, the sports betting tax rate would fall to 50%. If there are 13-14 operators, the rate would be 35% and 15+ operators would yield a 25% rate.

Currently, there are nine sportsbooks operators in New York.

A change in the tax rate would create a butterfly effect that would impact the state, gaming operators and bettors.

Pros and cons of lowering the New York sports betting tax rate

Projections show a lower tax rate would bring more operators to the Empire State, which is evident by bill S1962.

From a bettor’s perspective, having more operators is a positive. It would give New Yorkers more options to choose from, and forces operators into competition with one another to offer the best odds, best promotions, etc.

Genetski and Robins made it clear that a lower tax rate would urge them to invest more into growing their companies stake in the NY sports betting market.

Of course, a lower tax rate means less revenue for the state. But adding more operators would help make up for the loss.

What might happen if the tax rate stays at 51%

During the committee hearing, Genetski and Robins spoke about the drastic measures that would need to be taken for their companies to sustain profits in the NY market. Robins said if the tax rate remains at 51%, DraftKings would begin offering “worse odds” compared to other states.

After Assemblyman Gary Pretlow claimed that would be collusion, the DraftKings CEO provided more clarity. Robins said operators would keep an eye on the odds offered by their competitors, and after a few months every sportsbook would follow suit.

Robins also talked about pricey advertising costs not being worth it if the tax rate isn’t lowered. He said “meaningful” partnerships with sports teams and venues would be eliminated, which would surely stunt the growth of the NY market even further.

Genetski said FanDuel has already begun cutting costs in New York. He said:

“In fact, we’re now investing 50% less in New York.”

FanDuel is the leading sportsbook in New York. A decrease in its investment in the state would reduce the amount earned by the state in tax revenue.

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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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