Mobile Sports Betting Vs. Legal Cannabis: Which Will Generate More Tax Revenue For New York?

GamingToday.com is an independent sports news and information service. GamingToday.com has partnerships with some of the top legal and licensed sportsbook companies in the US. When you claim a bonus offer or promotion through a link on this site, Gaming Today may receive referral compensation from the sportsbook company. Although the relationships we have with sportsbook companies may influence the order in which we place companies on the site, all reviews, recommendations, and opinions are wholly our own. They are the recommendations from our authors and contributors who are avid sports fans themselves.

For more information, please read How We Rank Sportsbooks, Privacy Policy, or Contact Us with any concerns you may have.

Gaming Today is licensed and regulated to operate in CO, IN, MI, NJ, PA, TN, and VA.

The finalized New York State FY 2021-22 budget introduced legalized recreational cannabis sales and mobile sports betting to the Empire State. Both items project to impact the state’s tax revenue stream significantly.

Opinions on which of these newly legal products will lead to more tax revenue vary widely. The regulations on legal cannabis sales mandate a 9% tax that goes to the state, an additional 4% that goes to local governments, and a separate excise tax based on the THC level of various cannabis products.

MPG Consulting released a study that projects $1.2 billion in cannabis sales for New York in 2023, which will produce $362 million in tax revenue for the state and local governments. The study predicts those numbers to go up to $4.2 billion in sales and $1.3 billion in tax revenue by 2027.

Based on the MPG Consulting study, mobile sports betting would need to generate $1.3 billion in tax revenue to match legal cannabis at full maturity. While New York holds enormous potential as a legal online sports betting market, it might be hard to imagine a scenario where the state collects $1.3 billion in annual taxes.

The Unknowns Of New York Mobile Sports Betting

The regulations and tax rates regarding mobile sports betting in New York remain unclear. Gov. Andrew Cuomo made his mark on the sports betting bill he signed into law on April 22, 2021, which varied greatly from a competing bill supported by the State House and Senate.

Gov. Cuomo’s bill allows two sports betting operators to launch a total of four online skins in the state. The tax rates, launch date, and official designation of what constitutes an “operator” versus a “skin” remain a mystery.

The business model for New York mobile sports betting largely cuts casinos out of the equation. New York bettors will get a maximum of four online sportsbooks to choose from, and revenue produced by those platforms will get taxed at a minimum of 12%.

The actual tax rate on mobile sports betting revenue will likely far exceed 12%, however. Cuomo pushed for his version of the bill while advocating for a model that allowed the state to retain a bigger chunk of sports betting revenue.

The two biggest online sports betting markets in the US (New Jersey and Pennsylvania) license online sports betting sites to state casinos. New Jersey taxes online sports betting revenue at 13%, while Pennsylvania takes 36% in taxes for the state and local governments.

In New York, the State Gaming Commission will play the role of the house instead of the state’s retail casinos. The “tax” on mobile sports betting will likely more closely resemble the revenue-sharing system implemented in New Hampshire.

The New Hampshire Lottery took bids for mobile sports betting licenses, with DraftKings Sportsbook winning that battle. DraftKings Sportsbook currently operates as the only online sportsbook in New Hampshire, and the state takes 51% of all revenue.

State Comptroller DiNapoli Projects $493 Million In Mobile Sports Betting Tax Revenue

New York State Comptroller Thomas P. DiNapoli released a study that projects massive tax revenue from the state’s mobile sports betting industry. DiNapoli’s study predicts that online sports betting will send $493 million in annual tax revenue to the state by SFY 2024-2025.

That study also came up with a set of tax revenue projections for legal cannabis sales, which yield less ambitious numbers than the MPG Consulting study. The Comptroller’s Office sees legal cannabis sales producing $245 million in annual taxes by SFY 2024-25.

The DiNapoli study doesn’t project tax revenue figures past SFY 2024-25. For simplicity’s sake, the following comparisons assume that the DiNapoli study expects both cannabis sales and mobile sports betting to hit full maturity by then.

The tables below show how much mobile sports betting revenue would have to be produced for tax revenue to match cannabis tax revenue, based on the Comptroller’s SFY 2024-25 projections. DiNapoli projects $245 million in cannabis sales tax revenue for SFY 2024-25:

Comptroller DiNapoli’s Sports Betting And Cannabis Sales Comparison (SFY 2024-25)

Tax RateMobile Sports Betting RevenueTax Revenue From Mobile Sports Betting
12%$2,041,666,667$245,000,000
25%$980,000,000$245,000,000
37.5%$653,333,333$245,000,000
50%$490,000,000$245,000,000

At the minimum possible tax rate possible from Gov. Cuomo’s bill, mobile sports betting would have to clear $2 billion in revenue for SFY 2024-25 to generate $245 million in taxes for the state.

The $2 billion annual revenue figure marks roughly three times what the biggest online sports betting market (New Jersey) in the US generates. New Jersey is currently on pace to produce $662.4 million in online sports betting revenue in 2021.

Raising the tax rate on mobile sports betting makes it much more realistic for the market to match the legal cannabis industry, at least according to Comptroller DiNapoli’s projections.

Taxed at 37.5%, New York could hit $245 million in taxes on $653,333,333 in revenue. A 50% tax rate/revenue share could very well come to fruition in New York, and the state hits $245 million in taxes off just $490 million in revenue at that bracket.

Using the MPG Consulting study’s numbers, online sports betting has to generate significantly higher revenue to match the potential tax generation of legal cannabis sales. Here’s a look at that comparison using the 2027 projection of $1.3 billion in cannabis sales tax revenue from MPG:

MPG Consulting Sports Betting And Cannabis Sales Comparison (2027)

Tax RateMobile Sports Betting RevenueTax Revenue From Mobile Sports Betting
12%$10,833,333,333$1,300,000,000
25%$5,200,000,000$1,300,000,000
37.5%$3,466,666,667$1,300,000,000
50%$2,600,000,000$1,300,000,000

If the MPG Consulting numbers hold, mobile sports betting would have to reach unprecedented heights to generate as much tax revenue as legal cannabis sales.

Even if the state took a 50% share, online sports betting would have to produce $2.6 billion in revenue to yield $1.3 billion in taxes. That’s roughly four times as much as the New Jersey 2021 pace.

The year 2027 is still a long way out, of course, but predicting that any US online sports betting market can hit $2.6 billion in annual revenue makes for a pretty lofty prediction.

If any state could produce such numbers, New York stands as the most likely candidate. The Empire State’s sports tradition, tourism numbers, and population make it a prime candidate to become the top mobile sports betting market in the US.

Any comparison between legal cannabis sales and online sports betting comes with many variables, nearly all of which are on the sports betting end. The final tax rate/revenue share for the state still has to be decided, along with which sports betting operators will win the bidding war for New York licenses.

If the number of online sportsbooks available to bettors is limited at four, New York will pale in comparison to New Jersey’s market diversity.

New Jersey bettors can choose among more than 20 online sportsbooks, allowing line shopping, bonus hunting, and loyalty rewards accumulation at each. New York City bettors, by proxy, can enjoy all of those same benefits by taking the short trip to the Garden State.

New York’s mobile sports betting market can certainly match the tax revenue generated by legal cannabis sales. Whether that actually happens or not will become clearer as the details for online sports betting emerge in the Empire State.

About the Author

Geoff Fisk

Geoff Fisk is a San Diego-based freelance writer, specializing in the poker and gambling industries. He’s written for numerous platforms and has traveled the globe as a live poker tournament reporter. Geoff is an avid sports fan, but poker is his passion.

Get connected with us on Social Media