High 51% N.Y. tax rate concerns CEOs as online betting nears

By Bill King

The long-awaited big reveal of the nine sportsbooks that will be licensed to operate online in New York finally came last week, along with the announcement of a tax rate of 51%, a number that had CEOs bemoaning the economics, even as they celebrated their inclusion.

The state chose two consortiums: FanDuel, DraftKings, BetMGM and Bally Sports; and Caesars, PointsBet, WynnBet, BetRivers (through white-label operator Kambi) and Resorts World. Of the handful of applicants left out, only Penn Interactive, operator of Barstool Sportsbook, has a handle share of more than 5% in any state.

On an earnings call the day after the New York announcement, new Wynn CEO Craig Billings said he was pleased the company won a license, but cited the high tax rate as a concern. In his prepared remarks, Billings said Wynn would be slowing its marketing and customer bonus spends in the first quarter of 2022, focusing on targeting players who fit traditional payback models rather than on the battle for market share that has driven acquisition costs this football season.

“Given the tax rate, it’s a prime example of a market where you need to be incredibly prudent with respect to marketing and bonusing spend, a theme that I discussed pretty heavily in my prepared remarks,” said Billings, who was elevated after leading Wynn’s interactive arm. “To the extent that you’re prudent … there’s the opportunity to build a business there over time.”

Based on results in other states, New York’s high tax rate may deliver the most revenue, at least in the short term. In the early days of sports betting, those states with the highest tax rates generally have delivered the highest per capita tax revenue. Gaming analysts predicted that higher rates would lead sportsbooks to spend less on marketing and promotion and offer less favorable odds in those states, but that generally hasn’t happened, as sportsbooks have aggressively chased higher-value early adopters. Operators say that is likely to slow as markets mature.

SBJ Morning Buzzcast: January 17, 2022

NFL's top selling teams and players; Jim Phillips puts CFP expansion on hold and Netflix looks to juice up interest in pro tennis.

SBJ Spotlight: January 14, 2022

SBJ Spotlight: NFL strength, CFP confusion and the stealth Olympics In today’s Spotlight Roundtable, SBJ’s Abe Madkour and John Ourand are joined by LiveLike CEO Miheer Walavalkar and Syracuse sports management professor Rick Burton to talk about big news in sports business. Topics included the ratings strength of the NFL and the Dallas Cowboys; confusion in college sports and the CFP; tech advances and the metaverse; and how NBC is just trying to get through the Beijing Games on the way to Paris and L.A.

SBJ Unpacks: Ben Sutton and George Pyne

Two college football insiders, Teall Capital’s Ben Sutton and Bruin Capital’s George Pyne, discuss the College Football Playoff expansion, driving more value from the championship game and the future of bowl games in this game day edition of the SBJ Unpacks podcast.

Shareable URL copied to clipboard!


Sorry, something went wrong with the copy but here is the link for you.