FanDuel, DraftKings to New York: Lower Your Mobile Sports Betting Tax Rate or Lose Investment

New York must lower its 51 percent tax rate on mobile sports betting or lose millions in investment by top sportsbooks, the heads of FanDuel and DraftKings told New York state lawmakers in a public hearing today in Albany. 

The frank discussion between New York’s two top-performing mobile sportsbooks that collectively claimed nearly 75 percent – or $1.2 billion – of the state’s $1.6 billion mobile sports betting handle for December revealed cracks in the Empire State’s plan to maximize state revenue by maximizing the tax rate.

Both FanDuel President Christian Genetski and DraftKings CEO Jason Robins say they support a new proposal by Senate Racing, Gaming and Wagering Chair Joe Addabbo that would increase the number of sports betting operators from the current nine to a minimum of 14 with a corresponding reduction in the tax rate to around 35 percent by Jan. 2024. That’s close to the 36 percent tax rate on mobile sports betting in Pennsylvania, where revenue has grown steadily since mobile launched there in 2019. 

New York needs a similar tax rate if it hopes to grow revenue amid competition from the illegal market and surrounding states with much lower tax rates, Genetski and Robins told the state’s lawmakers today. 

No change will mean dialed-back bonuses, less investment with franchises in the state, and weak betting odds for New Yorkers, said Robins. 

“I think we’re still in a position where New York can achieve its revenue projections,” over the next four years, said Robins, “but I don’t think it’s remotely possible that it can happen under the current tax setup.” 

FanDuel, DraftKings See Stagnant NY Sports Betting Market Long-Term

New York is the largest mobile sports betting market in the US in terms of handle and revenue. It broke records last year when nearly $2 billion in mobile sports bets were wagered within four weeks of the state’s Jan. 8 launch. 

Mobile sports betting handle in New York to date totals over $16 billion, which translates into more than $700 million in New York state revenue from mobile sports betting so far. 

The plan is for state revenue to grow year over year in the first five years through fiscal year 2027. But both FanDuel and DraftKings are doubtful that will happen, given the current tax rate. 

DraftKings, Jason Robins
DraftKings CEO Jason Robins, center (AP Photo/John Locher)

Robins said the effective tax rate (actual amount of tax paid) is more than 70 percent since New York also taxes sports betting promotion offers. He and Genetski said that high tax rate also translates into a lack of growth. FanDuel specifically anticipates a 10 to 20 percent drop in revenue in New York year to year as it struggles for a higher hold percentage, said Genetski. 

Speaking for DraftKings, Robins said, “we would need some allowance for promotions and some change in the rate” to achieve projections. 

New Legislation Could Be a Game-Changer for New York Sports Betting

Addabbo has filed legislation that both sportsbooks agree could give the state and operators what they need to sustain growth. The legislation would be vetted as part of the New York State one-year budget process, which concludes with the start of the new fiscal year on April 1. 

Addabbo’s S.1962 would tie a reduction in the tax rate to an increase in the number of operators. By Jan. 2024, the state would be required to have at least 14 licensed mobile sports betting operators with a corresponding tax rate of 35 percent. By Jan. 2025, the number of operators would increase to 16 with a corresponding tax rate of 25 percent. 

Under those tax scenarios, the market could more than offset the losses of the current tax rate, Genetski told lawmakers. Otherwise, he said he expects revenue growth to stagnate. 

“The big early tax revenue numbers … will prove to be a fleeting achievement if we do not change the course for the long term,” said Genetski. 

Assemblyman Jeff Gallahan, R-Ontario County, said the budget process will ultimately dictate what happens with the tax rate. When asked by Gallahan what the sportsbooks intend to do if the 51 percent rate doesn’t change, Robins didn’t flinch. Worse odds, worse promos, and pulling back on partnerships with franchises would all be on the table. 

“The more we can align what can produce the most revenue for us (to) what the tax regime can do, the better off the market will be,” said Robins. 

Are Bettors Price Sensitive?

New York Assembly Racing and Gaming Chair Gary Pretlow said offering worse odds to increase company profits could backfire, and the types of bets a state permits is also a consideration. Pretlow said he’ll even cross the state border into New Jersey to bet on markets not allowed in New York, such as voted-upon events like MVP.

Bettors, he said, will go where they get the best odds. 

“If you at DraftKings change the odds on the Giants +15.5 and everyone else is doing 15, everyone is going to go (elsewhere),” said Pretlow.

Robins sees the situation differently. He said odds stayed competitive when tax rates changed in some European markets. He seems to see the US sports betting market working similarly on that front. 

Bettors of course always have alternatives, the illegal market being one of them. But illegal sports betting isn’t a good choice. Unregulated gaming means no revenue for the state. It offers no protection for bettors who may never receive winnings gambled on an offshore site. And responsible gaming rules that limit who can play, and how much, on such sites are nonexistent.

Another Issue: Jobs

New York has another stake in legal sports betting, too – jobs. FanDuel is based in the state’s Flatiron District in New York City. At least 1,000 people are employed by FanDuel in New York, said Genetski. 

DraftKings is based in Boston. Massachusetts (another huge New England sports market) launched retail sports betting today. As many as 11 mobile operators will launch there in early March ahead of March Madness. FanDuel and DraftKings are two of them. 

The tax rate on mobile sports bets in Massachusetts will be a much more modest 20 percent. 

Of course, New York is not known for being demure. The fourth-largest state in the nation in population, New York has a massive sports fan base that has proven it will bet big – and legally – if given the chance. Genetski today called the state a “critically important market” for FanDuel. But success is shared. When a sportsbook does well, the state does well. That, he said, will require a lower tax rate. 

“The operators in this state are really partners,” Genetski said. “When we do better, the state does better.” 

Related: Massachusetts Gaming Regulators Look Favorably on DraftKings’ Local Ties, Diversity Hiring

About the Author
Rebecca Hanchett

Rebecca Hanchett

Legislative Writer
Based in Kentucky's Bluegrass region, Rebecca Hanchett is a political writer who covers legislative developments at Gaming Today. She worked as a public affairs specialist for 23 years at the Kentucky State Capitol. A University of Kentucky grad, Hanchett has been known to watch UK. basketball from time to time.

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