The 51% tax that New York state imposes on sports betting operators is among the highest in the country. According to Jason Robins, CEO of DraftKings, the state could be looking to make a change to that tax rate soon.
“There has been some chatter of New York considering in this upcoming New York legislative session adjusting the tax rate down,” Robins said during Friday’s 2021 fourth-quarter earnings call.
Robins didn’t mention where that chatter may be coming from, but according to one influential state lawmaker, he and his colleagues are not the source.
“The state stands ready at any point to ensure that New Yorkers are provided the best possible product for mobile sports betting, (but) it’s premature to talk about changing the tax rate,” New York state Senator Joseph P. Addabbo Jr. said in a phone call with Gaming Today. “The tax rate was negotiated, and the state was clear from the get-go about the rate, so it wasn’t a surprise [for any of the operators].”
As a sports betting proponent, Addabbo was a leader in the state’s legalization of the industry.
In the first four weeks of legal online sports betting in New York, which launched January 8, $1.98 billion in wagers were made in the state. Gross gaming revenue — the amount won or “held” by sportsbooks — was over $138 million, which means these wagers brought more than $70.6 million in tax revenue.
In the first month of operation in New York, DraftKings acquired 300,000 new users in the state. The company handled $454 million in wagers, holding $35.8 million of that before kicking back 51% — $18.3 million — to the state.
The taxes are earmarked for spending on elementary and secondary education, grants for youth sports, property tax relief, and prevention and treatment for gambling problems.
What New York’s Sports Betting Tax Rate Means To DraftKings
New York state’s sports betting tax is a hot topic among operators, as such as a large number cuts significantly into their potential profits.
“We’re hopeful that with an appropriate tax rate, it can be a very profitable market for us,” Robins said on the earnings call.
Without a reduction in the tax rate, DraftKings expects the New York market to become profitable within two to three years. Based on its performance in other states, this is a standard timeline for the company to see profitability.
DraftKings’ ‘Disciplined’ Marketing In New York
During the earnings call, Robins explained that some competitors took aggressive promotional tactics to bring in new customers, but DraftKings stayed “disciplined” in its marketing.
To his point, Caesars Sportsbook offered sign-up bonuses worth up to $3,300 as it launched in New York.
Later in the call, DraftKings CFO Jason Park acknowledged the impact promotions have on profitability in emerging states. The costs of new markets contributed to DraftKings’ negative EBITDA and earnings per share in 2021.
There are six other sportsbook operators live in New York, including Caesars, FanDuel, BetMGM, PointsBet, and BetRivers, all of which are also seeking profitability and would benefit from a reduction in the tax rate.
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