New York sportsbooks are shrinking instead of growing, and that’s tied directly to the state’s 51% tax rate on operators.
So said DraftKings and FanDuel leaders during a nearly four-hour-long hearing today in Albany. They painted a gloomy picture of New York sportsbooks’ future to lawmakers assembled for the joint public hearing of the Assembly and Senate racing, gaming, and wagering committees. Lawmakers were evaluating the success of the 1-year-old mobile sports betting marketplace.
Gov. Kathy C. Hochul said New York sportsbooks contributed more than $909 million in tax revenue and licensing fees to state coffers during that time.
That revenue is unsustainable at the current tax rate, the operators told lawmakers.
FanDuel Group President Christian Genetski said betting is down 20% since the first three months after New York sportsbooks launched on Jan. 8, 2022.
DraftKings CEO Jason Robins said New Jersey’s 4-year-old online sports betting marketplace is growing faster than New York’s.
Robins said if New York drops its sportsbook tax rate to 36%, which is what operators pay in Pennsylvania, his company may not have to take “draconian” measures to remain profitable in the state.
If the tax rate remains at 51%, Robins said DraftKings Sportsbook would have to offer “worse odds” than it does in other states. It’ll also need to reduce the value of its promotions to gamblers and eliminate “meaningful” partnerships with sports franchises and venues. Team sponsorships are costly forms of marketing and advertising, he said.
Genetski said FanDuel Sportsbook, the No. 1 sportsbook in New York and the US, has already implemented some of those cost-cutting measures.
In fact, we’re now investing 50% less in New York.
FanDuel Sportsbook represents 40% of the New York market, providing $330 million “for education” so far, Genetski said.
New York Sportsbooks Signed Off on the 51% Tax Rate
New York’s nine sportsbooks signed off on paying a 51% tax rate, members of the New York State Legislature pointed out to Genetski and Robins.
Genetski agreed and said:
We were not going to say “no” to the New York market.
Robins said yes, the sportsbooks did agree to the 51% tax rate, hoping it would decrease over time.
Meanwhile, state Assemblyman J. Gary Pretlow, D-Mount Vernon, took issue with Robins’ statement about New York sportsbooks providing worse odds. He alleged that would be collusion that would lead to a state investigation. Pretlow, chairman of the Assembly’s Standing Committee on Racing and Wagering, is one of the lawmakers who was in charge of the hearing.
Robins said it wouldn’t be collusion. Operators would watch each others’ odds and the change would probably take months. However, the sports betting sites would probably all do the same thing in New York, because the 51% tax rate makes the current marketplace unsustainable.
Tax Rate May Lower
State Sen. Joseph P. Addabbo Jr., D-Ozone Park, proposed a bill to lower the 51% tax rate to 25% once there are 15 or more New York sportsbooks.
The proposed legislation would nearly double the legal sports betting sites from the current nine to 16 by the 2025 Super Bowl.
Genetski said the bill sponsored on Jan. 17 by the chairman of the New York State Senate Racing, Gaming, and Wagering Committee is “not ideal.”
However, it would help New York sportsbooks resume growth.
We want New York to be the beacon of this industry. And it can be.