More money was wagered in New York in 2022 than in any other state in the United States. But two executives at FanDuel and DraftKings warned that this will be short-lived if the tax rate does not change soon.
The major players and legislators in the New York sports betting market met for their end-of-year joint public hearing to review the first year of mobile sports betting in the Big Apple, and the operators did not appear thrilled with the state’s business model.
“The [sports betting] market is built on an unstable foundation,” DraftKings CEO Jason Robbins said.
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The unstable foundation he is referring to is the massive 51 percent tax levied by the state on the bookmakers’ gross revenue, which led to operators losing $200 million in just over a month of operation in 2022, The Post reported last year.
Meanwhile, the state is raking in the dough and giving most of it to help fund their education departments. In 2022, New York made a cool $709 million in tax revenue on more than $16 billion wagered and an additional $200 million on licensing fees.
New York is, without a doubt, happy with those results. But there were nine licenses awarded in New York last year, and only seven of those licenses are in use. Bally Bet and Resorts World paid the hefty fee to obtain the license but seem content sitting this one out until the tax rate is lowered and there is a clear path to profitability.
“There was no sunset, so you knew it was 51% going forward. You negotiated it. You agreed to it,” senator Joe Addabbo argued. “And now we have these numbers, and there’s no real foundation to say these numbers are suffering at this point.”
Robbins did pushback, mentioning that the high taxes – which also include a tax on free bets that make operators zero dollars in revenue – could force his sportsbook into giving New Yorkers worse odds on their bets compared to the rest of the country.
In other states like New Jersey, which has a 13 percent tax rate, you will still have the normal odds with an average vigorish, or vig, of six-to-four percent on your average straight bet. In New York, the vig could jump dangerously close to double digits, negatively affecting the consumer.
If the odds get worse, it would theoretically push the customer back to the illegal market, according to Robbins.
“My fear is that because of the early success that we’re going to wait and see, 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,” Robbins said.
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Addabo is sponsoring legislation that could reduce the rate by half by 2025 by adding more operators who will pay big licensing fees to make up for the lost gross revenue tax dollars.
This would open the door to Barstool Sportsbook, soon-to-be Fanatics Sportsbook, and many others who will all be lining up to tackle New York’s sports betting market with a clear path to profitability.