Longevity concerns

Some sportsbook operators in New York believe that the relatively high tax rate on their revenues could have negative consequences in the long run. DraftKings and FanDuel executives testified on Tuesday at a joint legislative hearing for the Senate Standing Committee on Racing, Gaming, and Wagering that was reflecting on the first year of online sports betting in the state.

The current tax rate on gross revenue from online sports betting is 51%, which is significantly higher than any other state. The next highest tax rate is 36% in Pennsylvania, with the nationwide average sitting at 13%.

The state received over $709m in tax revenue and $200m in license fees.

New York’s online sports betting scene has been up and running now for more than a year, with over $16.5bn in wagers placed in year one. The state received over $709m in tax revenue and $200m in license fees.

DraftKings CEO Jason Robins and FanDuel president Christian Genetski are both skeptical that these high tax intakes will continue. Genetski cited certain estimates that point toward total betting handle for New York’s online sportsbooks decreasing each year by 10-20% if the authorities don’t lower the tax rate.

Potential knock-on consequences

One example that was illustrated on Tuesday was the online sports betting market in France. While it had a strong first year of operations, revenue subsequently declined due to a high tax rate and operators exited the market.

Operators could spend less money on promotions and marketing efforts if no changes come and operators that only have a small share of the market might cease operations. This would lead to fewer options and less value for consumers. Genetski warned that another knock-on consequence of continuing with the 51% tax rate would be worse odds for bettors, which could lead to New Yorkers turning to black market platforms.

Hopes for change

Sportsbook operators are hoping that New York introduces a tax rate that is closer to the industry standard across the US. Robins believes that a balance between allowing operators to provide a good experience for consumers and tax revenue can be met.

in favor of the legalization of iGaming in New York

A bill recently introduced in the state legislature would drop the tax rate if more operators enter the New York market; 35% if 13 or 14 operators were in the space and 25% if at least 15 online sportsbooks are in the market. A review of the fiscal implications of such changes is still ongoing. Both Robins and Genetski support this bill and are in favor of the legalization of iGaming in New York.