New York lawmakers introduce bill to reduce online sports betting tax and add more sports betting


New Yorkers would have access to nearly twice as much online sports betting under a bill introduced Thursday that would also cut the nation’s highest tax on sports betting in half.

New York broke just about every monthly record in its action month since launching online sports betting in mid-January, topping $1.6 billion in wagers and $63 million in taxes.

But lawmakers like Assemblyman J. Gary Pretlow already want to change the current model – which takes half of the operator’s revenue – before it becomes “unsustainable”.

“The earnings numbers look great in the press, but a lot of it wasn’t real money. With places like Casesars giving away $3,000 promo matches, you end up having $6,000 per person they pay taxes on,” Pretlow told Action Network. “It’s unsustainable in the long term. They will not be able to continue giving incentives and making profits.

His bill (AB 8658) would lower the current 51% tax rate on online sports betting to 35% by increasing the number of licensed operators from nine to 14 by 2023. It would fall to 25% in 2024 with the approval of at least two other operators.

These rates are more in line with neighboring Pennsylvania and New Jersey, two of the oldest and most profitable sports betting states. This is exactly the change operators have been asking for, amid concerns about profitability.

Modification of the processing of promotions

It’s unclear how much of New York’s first-month revenue came from free bets and promotions, though if other states are any indicator, it was a lot.

In Virginia, they represented over 43% sports gaming revenue in January. Virginia, along with states like Pennsylvania, Colorado, and Michigan, allow carriers to deduct promotional revenue before taxes.

On Wednesday, Pretlow told Action Network it was an “alternative” he “prefers not to do.” A day later, his bill was amended to include the promotional deduction:

(b) A mobile sports wagering operator may exclude sports  wagers  that
    20  were  placed  using promotional wagering credit from its sports wagering
    21  gross revenue.

A New York Post report suggests that the high tax rate coupled with no deduction for promotions costs sportsbooks $200 million in their first month.

After their initial blitzkrieg of promotions, companies like Caesars reduced their offers. Instead of a $3,000 first deposit, the company now offers users $300 in site credit for their first $20 bet.

But the operators who paid New York $50 million just for a license always saw profitability in the Empire State as a long-term project. On a recent earnings call, DraftKings CEO Jason Robins said he was “targeting a two to three year path to profitability for the state.”

The bill would also allow traders to carry over their losses from month to month.

New legislative landscape

Pretlow said the ideology of his legislation has “always had the support of [his] colleagues,” but former Governor Andrew Cuomo had insisted on a 50% tax rate, threatening to veto alternatives.

He is much more comfortable introducing the proposed tax cuts now that Governor Kathy Hochul has taken over from the disgraced former governor. She’s been bullish on gaming during her seven months in charge, even offering three new upstate casinos in her 2022 budget.

Normally, incumbent sportsbooks would stand up to the increased competition, but since that means they would pay less than half of what they currently do in taxes, the bill has their full support, Pretlow said.

The bill also reserves two of the new online licenses for minority-owned sports betting, neither of which currently operates in the Empire State.

It has been referred to the Races and Games Committee, although no formal vote is yet scheduled.

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