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NY Sportsbooks Call for Lower Tax, Arguing that 51 Percent is too High

Since January of this year, online sports betting has been legal in the state of New York.  Sports betting, in general, is extremely popular across the country, with 30 states including the District of Colombia now having access to legal online betting.  Tens of millions of dollars are wagered every month, but this does not come without a tax of course. New York sees some of the highest tax rates in the country when it comes to taxing both the bettor and the sportsbook itself.

The numbers

Since January, New Yorkers have wagered almost $8 billion in bets, with the sportsbooks keeping around $550 million in revenue from those bets.

As it stands currently, sportsbooks operating in the state of New York like BetMGM, DraftKings, and FanDuel are subject to a 51% tax on their gross sports betting revenue. That is also coupled with a $25 million licensing fee needed that these sportsbooks already paid to the state to operate. These books are arguing that the high tax hinders the ability to offer competitive odds in comparison to the surrounding states.

The state also taxes promotional betting revenue, for example, if a sportsbook offers a $500 risk-free bet and the bettor loses that bet, the book is still taxed on that money even though there was no monetary value to the wager.

Buyers Remorse

Sportsbooks as a collective were very eager to enter the New York market, and for good reason. As it stands now New York is the largest sports betting market with a population of more than 20 million. After just 5 months these books are having a bit of remorse about their previous decision, concluding that the state’s tax conditions are unreasonable. “We simply can’t apply our capital against an irrational investment thesis,” said Gary Deutsch, chief financial officer of BetMGM. “Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”

Wrap Up

While it seems, for now, sportsbooks don’t have any plans to pull out of the New York market, but they have made it clear that they are unhappy with the tax conditions the state is imposing. It could be possible that if these books continue to be hindered by these conditions they may be tempted to pull out of the market altogether but that remains to be seen. State Lawmakers including Gov. Kathy Hochul have not commented on the issue.

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