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If you’ve followed the U.S. legal sports betting scene at all, then surely you’re likely aware of New York’s tax rate — a whopping 51 percent. It was a shock when they first rolled it out, and even years later, it remains a talking point.
Once again, it’s under fire. Naturally, there’s one side (mainly the operators) that want the number to shrink. But on the flip side (New York lawmakers), they say there’s simply no other way than to keep things the way they are.
So what is it? Well, let’s examine both arguments some more in this article.
Why New York’s Tax Rate Is Here To Stay
Earlier this month, the National Council of Legislators from Gaming States met for an annual summer meeting in Pittsburgh. Among many things talked about, the 51-percent tax rate was discussed.
Troy Mackey, the coordinator of the New York Assembly’s Racing & Wagering Committee, was in the discussion. He made it very clear: there’s no going back on the tax rate now — not after being live since January 2022.
Here’s how Mackey was quoted: “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. 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. That is the argument we’ve been up against.”
Ah, yes, the classic “think of the children” excuse. We mean, it’s not a bad excuse, but politicians and stakeholders are almost too quick to hide behind this and defend the issue with supposed ethics. After all, who wants to argue against it and say education should be less funded? That’s hardly going to win in the public relations department.
Mackey also went into how the 51-percent tax came to be in the first place too. The former (and now disgraced) New York governor Andrew Cuomo had the bright idea (of course!). Well, he borrowed the idea from nearby New Hampshire. Only DraftKings is allowed to operate in the state, however, they too are taxed at 51 percent.
Before this Cuomo suggestion, New York was planning on a 37 percent tax rate — still high, but not country-leading high either. Unfortunately for operators (more on them soon), it was not to be.
They went forward with a 51-percent rate, while at the same time, only taking in seven sportsbooks. In 2022, the same year legal New York betting launched, legislation was written to expand the number of operators. That legislation died without much movement though — probably to the benefit of sportsbooks operating with low margins already. Doubling the operators would’ve just thinned the market even more.
Operators Vouch For Change
Let’s hear the other side of the argument, that of the seven operators toughing it out in New York. Then and now, their opinion has remained the same — this high tax is bad for the customer (they too hide behind this excuse even though there’s merit to it).
DraftKings CEO Jason Robins was asked about the tax rate in 2023. He’s warned, despite early success, sustainability will be difficult in the Empire State.
“It was a different time and a different market,” said Robins. “Operators, who were understandably excited about New York opening up, were focused far more on customer acquisition in the short term and far less on what would create sustainable market over time.”
At the onset, books like DraftKings spent big on promos to acquire customers — who are typically “sticky” and don’t leave a betting site once they get ingrained into it. But two years later, DraftKings and other competitors say they’ll have to cut back on free-play deals.
Not only that, but worse odds for bettors — a bigger “vig” than the typical 10 percent. Likewise, less marketing spend with New York-based pro teams too.
At this point, they are more empty threats than anything else. Operators have yet to do these things, but hey, things can change — except the 51-percent tax, which seems to be shoehorned in for a long, long time.
New York Market Continues To Lead The Nation
Despite all this drama, the New York sports betting market continues to do one thing: print money and print some more.
Here are the latest numbers to back that: in June, the New York Gaming Commission reported $134.2 million in operator winnings for the month. That number now puts them past $4 billion in revenue since legalization. The state of New York is blowing competitors out of the water — mainly because of the high taxes and population.
Still, the figures could be even better, crazily enough. There’s still a thriving market of offshore sportsbooks in the Empire State — who predated the regulated bookies. We don’t fault New Yorkers for going offshore. There are more betting markets and payment types here, which offers a better playing experience. If you’re reading this and want in, we recommend starting with one of the offshore bookies listed below.
