There is a possibility that the tax rate in the New York sports market could change next year. The Empire State is also witnessing its first NFL season because the launch began on January 8th last year.
The NFL Season is Not Going as Planned in New York
The sports betting industry as a whole was expected to make a comeback after the summer slowdown. However, the weekly numbers aren’t meeting the expectations the operators and state would have hoped.
The online sports betting handle declined by $33 million from Week 1 to Week 2 as the bookmakers combined to register a total weekly handle of $297 million for Week 2 from September 12th-18th. That is compared to $330 million from the previous week covering September 5th-11th.
Many believed that the handle would change massively as football season is finally here. Despite the revenue exceeding expectations by a mile, the weekly handle seems to have difficulty following the trend.
The Revenue Numbers Skyrocket as the Weekly Handle Decreases
Despite the weekly handle figures noting a decrease, the revenue numbers went in the opposite direction. Mobile sportsbook operators combined to accumulate approximately $40 million in the week ending on the 18th.
The reason behind this discrepancy is due to the high win percentage, as the results swayed in one direction. The bookmakers combined for a hold rate of 13.4 percent, nearly double the national average.
Between January 8th and September 18th, New York’s nine mobile sportsbooks combined to handle $11 billion. These entities have $866 million in gross gaming revenue and $442 million in tax income.
Some experts aren’t surprised by the handle decrease as the operators have cut back on marketing and promotional spending. Caesars had the biggest promotion in the industry’s history when the sportsbooks and three others were able to launch before the other five that are currently operating.
The highest tax rate in the industry also hinders the path to being profitable in the Empire State. A few months ago, DraftKings CEO Jason Robins stated that it would take at least three to five years for DraftKings to be profitable.
Assemblyman Gary Pretlow stated that the handle drop wasn’t surprising at all. He said on a news source,” To me, it’s not surprising…But because they’re subject to this 51% tax, they’re not giving away as much money because they’re paying taxes on their own money. You’re going to see a decrease in handle because the money that you’re seeing now is all coming from the players and not necessarily from the FanDuels, DraftKings and MGMs of the world.”
Gaming Lobbyist Wants the System to Change
He believes that the system is broken as New York is one of the few states where promotional credits are taxed at a 100 percent rate. He pushed for the number of sportsbooks to go from nine to 14 by January 31st, 2023, and 16 by January 31st, 2024.
There would have been a reduction in the tax rates from 51 percent to 35 percent to 25 percent, respectively. Due to the rapid change in direction, the bill did not pass.
As the state has a high barrier to entry, businesses like Bet365, Fanatics, and Barstool might have a second chance to enter the New York market after failing to win a license during the open bidding process. The top NFL operator this season is FanDuel, with a two percent lead in the overall handle and a 10 percent lead in revenue.