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New York has no plans to lower 51% sports betting tax rate
The top sports betting state in the country is satisfied with its current sports betting tax situation, and does not intend on lowering its high rate anytime soon.
When it comes to the online sports betting landscape in the United States, there’s no denying that New York is king. The state has posted the highest betting handle and highest revenue in the country, despite not legalizing online betting until 2022.
There was no doubt that sports betting would be a massive success in New York. The state has the fourth largest population in the country and has 10 professional sports teams within its borders. However, there was concern when the state announced it would launch betting with a 51% tax rate on operators. It remains the highest tax rate in the country.
Former Governor Andrew Cuomo wasn’t overly enthusiastic about legalizing online betting. The high tax rate was a major reason he eventually supported legalization. Lawmakers and operators fought for a lower tax rate, but the 51% number did not change. There was discussion that as the state’s market developed and more operators were added, the tax rate might be decreased.
However, to this date, no new sportsbooks have acquired a license from New York since legalization commenced. The state originally approved nine licenses, the same number of currently active licenses in the state. Even if the state does eventually add operators, Assemblyman Troy Mackey poured cold water on the idea of the state lowering its tax rate.
Mackey says tax rate won’t be lowered
Last week, the National Council of Legislators from Gaming States took place in Pittsburgh. Representing New York, Mackey discussed the state’s success and the high tax rate. “New York is doing extremely well and it’s one of those things that you cannot go back now, unfortunately, to reduce the tax rate.”
The state originally approved nine sportsbook operators: FanDuel, DraftKings, Caesars, BetMGM, BetRivers, PointsBet, Wynn, BallyBet and Resorts World. After the launch in 2022, PointsBet was sold to Fanatics, who entered the state in late February. Wynn sold its license to PENN National Gaming, which plans on bringing ESPN Bet to New York sometime in the fall. Though two operators have changed, no new licenses have been added in the state.
Mackey said that lawmakers tried to introduce legislation to potentially bring more operators into the state. The hope was that with more operators, the tax rate could be lowered. However, the idea was met with resistance. “We tried to revisit that and there was no justification, well, you couldn’t justify taking away money from education and giving it to a corporation.” A large portion of tax earnings from New York sports betting funds education in the state.
There has been plenty of opposition to the state’s tax rate in the past few years. Some lawmakers said the high tax rate would stunt the growth of the market. Operators claimed there would be no way for them to make money in the state. Some bettors worried about worse odds and fewer promotions.
There’s no denying the state has benefitted from the 51% tax rate. Sportsbooks have paid more than $2 billion in taxes to New York in just 2.5 years. Pennsylvania is next in terms of tax revenue generated. The Keystone State has earned just over $615 million in tax payments from operators thanks to its 36% rate.
New York market is booming
Since launching in January 2022, the New York sports betting landscape has been firing on all cylinders. Some might argue that’s in spite of the high tax rate, but others would say there’s no use in fixing something that isn’t broken.
New York sports betting has set records for gross gaming revenue, bringing in more than $4 billion in the two-plus years since online sports betting launched. That’s far and away the highest number in the country.
A large percentage of that revenue comes from FanDuel and DraftKings. The two main operators have combined to generate $3.25 billion. That accounts for nearly 80% of the revenue generated by the state.
The seven other operators in the state combined to make just under $820 million. A majority of that number comes from the combination of Caesars ($424 million) and BetMGM ($215 million).
With the market being so top-heavy in New York, one has to wonder if there’s even much of an appetite for other operators to join the state. Even if more operators get involved, don’t expect the 51% tax rate to come down anytime soon.