Sportsbook operators that accept wagers in the United States have to abide by the tax rate that is set at 51 percent. There could be a slight amendment in the future, and the numbers for the week ending on September 18th are also out.
New York’s Sports Betting Market Hasn’t Lived Up to Expectations This Month.
The Empire State had its first opportunity at a full NFL season this year. With all the internal and external factors, the online sports betting market has been slightly underwhelming to this point.
Bookmakers combined to record a total weekly handle of $297 million for Week 2 from September 12th-18th, down $33 million from Week 1. To break down the numbers even further, the weekly handle declined from $330 million to $297 million.
Some experts have expected more from New York’s market compared to other jurisdictions across the industry. There is still good information that was reported, but Assemblyman Gary Pretlow may have a reason as to why the numbers have met or exceeded expectations in the early portion of the NFL season.
The Weekly Handle and Revenue Totals have an Inverse Relationship
The nine mobile sportsbooks that are currently in operation have accumulated $40 million in revenue for the week that spanned from September 12th-18th. The reason behind its success in that aspect is the results favored the house over the bettors.
The operators combined to have a hold rate of 13.4 percent, which is nearly double the national average. New York online sportsbooks handled $11 billion in gross gaming revenue and $442 million in tax revenue this year from January 8th to September 18th.
According to Assemblyman Gary Pretlow, New York has failed to meet the status quo in the first two weeks of the NFL season. For example, Caesars had the biggest promotion in the industry’s history by offering up to $3000 in deposit matches and $300 to new customers.
Caesars and other sportsbooks cannot offer the same promotion as marketing, and promotional spending has skyrocketed. Bookmakers in the Empire State are taxed on their promotional spending and have to set money aside to pay the federal excise tax.
Morgan Stanley equated the NY tax rate to 77 percent, which is overwhelming for the operators. Pretlow stated, “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.”
The bookmakers have no incentive to spend millions on marketing strategies since most will not be profitable for five years or more. According to CEO Jason Robins, it will take DraftKings three to five years to become profitable.
Could This Call for a Change in the Market?
Jeremy Kudon is a lobbyist for Orrick, and believes that the system is “broken.” In 2023, he wants to see 14 sportsbooks and 16 by 2024. According to the plan, the tax rates would also decrease from 51 percent to 35 percent and 25 percent, respectively.
This would also give companies like Fanatics, bet365, and Barstool another chance as they failed to get a bid the first time. Fanatics need to gain market access and conduct business in at least ten other states before having the chance to enter California.
At the moment, there is a lot of pessimism surrounding the Golden State’s sports betting market for both the gaming tribes and the online operators. The idea to bring down the tax rates and the other factors related to this will certainly be revisited in the next legislative session.
The issue with all this is that 98 percent of the revenue is used to fund programs like youth sports and other educational programs. A sudden change in the tax rate could negatively affect these programs without much consideration.