New York: key lawmaker's bill seeks to ban online sportsbooks from requesting 51% tax rate changes

New York Assembly Standing Committee on Racing and Wagering Chair J. Gary Pretlow introduced a bill on Monday, two days after the state's debut in the mobile sports betting market, to prohibit licensees from requesting a change to the 51% tax rate on gross mobile sports gaming revenue, the highest in the US.

Bill A8658, which was referred to the Racing and Wagering Committee for a hearing and would take effect immediately if approved, adds that "once such contracts have been awarded and a tax rate has been established, no modification to such tax rate may be requested by a licensee."  The committee is vetting bills up for consideration during the 2022 regular session of the New York State Legislature, which meets until early June. 

On Saturday, January 8, New York State saw DraftKings, FanDuel, Caesars Sportsbook, and Rush Street Interactive (BetRivers) start taking online and mobile sports wagers. Five more operators (PointsBet, BetMGM, Resorts World, BallyBet, WynnBet) are still working to meet all requirements and enter the market ahead of the Super Bowl.

However, the 51% tax rate on gambling revenue could make it a more challenging market for operators than others like New Jersey, where the number is 14.25%. This tax rate is among the highest in the nation, tied with New Hampshire. That'll make it harder for operators to profit off their customer bases in the state, Jason Ader, CEO of SpringOwl Asset Management and 26 Capital Acquisition Corp, told Business Insider. 

"Everybody wants to be in New York because it's a trophy market in terms of the size of the state and its importance, but the tax rate is really prohibitive," Ader said. "It's very hard to make money in sports betting. Put 51% tax rate on it and it's maybe a bit more like a fool's gold rush than a gold rush."

Sports betting is generally not yet a profitable business in the US, and like in any new market, companies are spending heavily on marketing and promotions to acquire customers.

Pretlow has expressed frustration with the state’s mobile sports betting selection process and, according to some news sources, the 51% tax rate. The Albany Times Union reported on Jan. 6, 2022 that Pretlow “predicted the rate might deter platform operators from bidding or from offering the kinds of business-building promotions seen in other states.”

New York's regulatory body said in a June 2021 mobile sports wagering FAQ document that no future operators will be authorized “under the Commission’s interpretation of present law.”