New York bill prevents books from asking for lower sports betting tax rate


The early numbers for mobile sports betting in New York are staggering, giving longtime Congressman J. Gary Pretlow optimism that the Empire State will become the nation’s most robust market for online sports betting.

On Monday, New York Governor Kathy Hochul’s administration revealed bettors wagered about $150 million in legal sports betting on Jan. 8 and 9, the first weekend of mobile sports betting across the state. . On January 17, the 10th day of mobile sports betting in New York, there were 1.2 million active sports betting accounts statewide, with New Yorkers adding more accounts than bettors in Pennsylvania and the United States. New Jersey reunited, according to Vancouver-based geolocation security firm GeoComply. .

But Pretlow, chairman of the Assembly’s Racing and Betting Committee, objects to any operator asking the state for a lower tax rate on gross gaming revenue (GGR) from sports betting in line, a tactic he says would amount to “bait-and-switch.” With a 51% tax rate on online GGR, New York has the highest sports betting tax rate in the country along with New Hampshire, another state with a limited operator model for betting sportsmen.

Two days after the highly anticipated launch, Pretlow introduced legislation which prevents sports betting license holders from requesting a change in the tax rate.

“I don’t want existing entities to be able to reduce their taxes,” Pretlow said. Sports handle. “If you want to lower your taxes, let more competition in.”

Revisiting the New York Final Tax Rates Matrix

The meteoric start suggests New York could surpass $10 billion in 2022, a benchmark only one state, New Jersey, reached last year. If the handful approaches $12 billion to $15 billion, New York will be on track to hit a goal of $357 million in state tax revenue for fiscal year 2023, another number that would rank among the highest. high in the country. Upon maturity, New York has set a goal of generating $500 million in annual tax revenue, a level the state expects to achieve by fiscal year 2026.

Pretlow, an open market advocate, understands operators’ concerns about profitability in today’s tax environment. Last July, Pretlow said Sports handle that he wouldn’t be surprised if the best companies in the industry came together in a consortium. He suggested that companies would do everything in their power to “maximize their profits” since their expenses would be “so high”. Pretlow proved correct, as four industry heavyweights – FanDuel, DraftKings, BetMGM and Bally Bet – successfully joined forces a month later in a so-called “super deal”.

As speculation grew over the summer that the tax rate could approach 70%, Pretlow said at the time that he did not expect the rate to be higher than 55%. In October, the New York Gaming Commission released a final tax rate matrix for the state’s mobile sports betting bidding process, which contained seven tax brackets ranging from a minimum of ‘about 35% to a maximum of nearly 65%. The cap indicated that at least one bidder had submitted a preferential tax rate scenario of 64%. When the commission recommended bids from nine mobile sports betting operators in November, it set the final tax rate at 51% based on the contours of the matrix.

(Source: New York Gaming Commission)

Pretlow is not opposed to lowering the tax rate below 40%, but only if more operators than nine are allowed to enter the market. Based on the matrix, four additional operators would need to be licensed for the rate to be revised down to 39%. Two prominent companies, Fanatics and Barstool Sportsbook, headlined a group of companies that failed to secure bids in November. However, the commission has indicated that no additional operator shall be entitled to obtain a license under its interpretation of New York law.

If the number of operators remains at nine, Pretlow wants the tax rate to remain above 50%. The current entities have agreed to licensing requirements that granted operators a 10-year license at a 51% tax rate, and Pretlow wants licensees to be held to that standard.

“If they come back to us and say, ‘Oh, we’re not making any money, could you reduce our tax to 40%?’ I say, ‘No, you made a deal,'” Pretlow said. Sports handle.

“Why should we allow the entities that said they wanted to pay the 51% to lower the rate, when other entities might have had an equal chance to bid? It’s a matter of fairness,” he said. he added.

Shortly after the commission awarded the recommended bids in November, DraftKings CEO Jason Robins thought there might be changes in New York’s tax rate over time. Still, Robins stopped short of publicly pressuring the state to lower the rate before the market started.

“We’re obviously prepared for whatever happens, but assuming it stays where it is today, we’ll adjust accordingly,” Robins said at the Canaccord Genuity 2021 Digital Gaming Summit.

Achieving Tax Fairness

Pretlow is not aware of any other jurisdiction that has a provision similar to the one he is proposing, in which gambling companies could not even ask the state to change the tax rate. When asked if New York would rewrite the script for other states such as California and Florida on how to build a fair tax model on mobile sports betting, Pretlow replied that he wants New York to become the national leader on many fronts, including sports betting and horse racing.

“I just know that as race committee chairman for over a decade, I know what I want, and I really don’t take the initiative from other states. I like to be innovative and do what I want. ‘it must,’ he said.

However, the high tax rate has been criticized by a host of prominent gambling industry leaders, who say it will be difficult to meet profitability targets at such a high rate. An industry analyst has suggested politicians may not know how much revenue they are leaving on the table if operators invest in low-tax jurisdictions instead.

At this time, Pretlow said he has yet to receive comment on his tax freeze bill from Hochul, who took office in August after former Governor Andrew Cuomo resigned.

“How could she be against it?” If she’s against it, it’ll show her hand. … We are trying to increase revenues, and this bill would maintain the revenues we are getting. If you do not have this invoice, you expose yourself to a reduction in state revenue.

There is priority for Pretlow’s bill. In 2015, New York State granted casino licenses to three properties, completing an exhaustive process that began early in Cuomo’s tenure when the former governor signaled plans to expand casino gaming statewide. Around 2017, casino lobbyists returned to the state to try to negotiate a lower tax rate, Pretlow said.

As of 2020, New York casinos in three regions paid a tax rate ranging from 37-45% on slot revenue, with Rivers Schenectady paying the highest rate at 45%. A year earlier, a Rivers general counsel had lobbied unsuccessfully for a reduction, arguing that he was difficult to remain competitive at the price given that two Massachusetts casinos paid a slot machine tax of around 25%.

A provision inserted into last year’s mobile sports betting legislation contains a section that allows upstate casinos to apply to the commission for a reduction in slot machine taxes at a rate of 30%. Pretlow’s bill prevents companies from following a similar path regarding their sports betting taxes.

“I went down this road and I don’t want to go back down it,” Pretlow said.


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