We’re breaking these records, and we’re doing so phenomenally well with only eight real active sportsbooks. Legislation that would replace New York's 51% tax rate on mobile sports betting revenue with a rate based on the number of sportsbooks has been reintroduced in the state Senate.
The bill, S1962, also calls for allowing operators to exclude wagers placed using promotional credits from its taxable revenue and would give operators that were previously denied a mobile sports betting license a boost with any effort to reapply.
But the crux of the bill is to scrap a 51% tax rate that the industry has complained is too high. Operators found an ally of that argument in Sen. Joseph Addabbo Jr. (D-Howard Beach), who first introduced a plan to replace the 51% rate during the 2021-2022 legislative session.
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Under S8471, the bill proposed by Addabbo last year, the 51% rate would be replaced with a graduated system. Specifically, the tax rate would be as low as 25% if there were 15 or more mobile sportsbooks live in the Empire State but would climb to a high of 64% if there were as few as five live sportsbooks in NY.
The New York State Gaming Commission (NYSGC) is currently authorized to issue nine mobile sports betting licenses. It awarded licenses to Bally Bet, BetMGM, Caesars Sportsbook, DraftKings, FanDuel, PointsBet, Resorts World, Rush Street Interactive (RSI), and WynnBET in November 2021.
New York Eyes More Sportsbooks
Despite efforts by Addabbo and other supporters, S8471 didn’t make it through the committee stage last year. But the state allows failed legislation to be reintroduced in the following legislative session with a new print number — hence S8471 is now S1962 for the 2023-2024 legislative session.
The new bill was reintroduced Tuesday and is back before the Senate Committee on Racing, Gaming, and Wagering, a panel chaired by Addabbo.
Addabbo’s office did not return a message seeking comment Tuesday. In an exclusive interview last spring, he said New York would likely need to add more sportsbooks to compete against other states — many of which have more than the nine currently allowed in the Empire State.
“We broke the national record in that first month of January with the amount of handle, $1.6 billion, and we did that with really only four active sportsbooks,” Addabbo told US Gaming Review in March 2022. “Then it grew to seven [sportsbooks], we’re now at eight, and the max is nine. We’re breaking these records, and we’re doing so phenomenally well with only eight real active sportsbooks.
“But we know other states have more, and this is an extremely competitive market that we’re in. The legislature is not going to stand on the side and say, 'we did mobile sports betting, we’re done.’ No, the legislature is doing its job by standing ready and saying, 'how can we make this a better product for New Yorkers? How can we make this even more successful?’”
With that in mind, S1962 calls for the NYSGC to issue no fewer than 14 licenses to mobile sports wagering operators by January 31, 2024, and 16 licenses by January 31, 2025.
The number of sportsbooks would dictate the tax rate for everyone.
If nothing were to change and the market continued with nine sportsbooks, the tax rate would stay at 51%. The rate would increase to 58% if the number of sportsbooks slipped to eight. Further increases to 60%, 62%, and 64% would take effect if there were seven, six, or five sportsbooks — the state requires a minimum of four.
Conversely, if the number of mobile sportsbooks increased to 10, the tax rate would decrease to 50%. The rate would take a significant drop to 35% if there were 13 sportsbooks and down to just 25% if there were 15 or more.
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Another Shot for Some Operators
Not every operator was picked for a license by the NYSGC in November 2021.
Passage of S1962 could help soothe the pain. The bill stipulates that the operators previously denied a license are automatically eligible to reapply.
The NYSGC “will give priority to the review and scoring of reapplying applicants,” S1962 states, but added that “nothing herein shall prohibit a platform provider that did not previously respond to the request for an application from applying.”
Bet365, Fanatics, FOX Bet, Penn National Gaming, and theScore Bet submitted unsuccessful bids with the NYSGC. Penn plans to launch its Barstool Sportsbook in the state.
S1962 would allow operators to exclude wagers placed with promotional wagering credits from the state’s definition of “sports wagering gross revenue.” Doing so would exclude such wagers from operators’ taxable revenue.
The bill would also allow operators with a negative sports wagering gross revenue in a given month to carry over the negative amount filed for the subsequent month. But no amount could be carried over for more than 12 months from the original carryover.