Since the legalization of online sports betting in New York, in January 2022, mobile sportsbooks have been required to pay 51% tax on their gross revenue from sports betting. This is the highest tax rate across all states that have legalized online betting to this point.
What Does the High Sports Betting Tax in New York Mean for Other States?
The high level of taxation on sportsbooks in the state could have an impact on betting in New York and other states such as New Jersey according to a sports betting expert from JustGamblers. He said:
“Online sports betting operators in New York are becoming concerned about the way the high tax rates are eating into their profits and affecting their ability to operate. If the situation continues, they could decide to concentrate their efforts in other states such as New Jersey. This would obviously be good news for those other states.”
So, is this inevitably what will happen? The answer to that is, not necessarily. To see what the future of online sports betting tax rates is in New York, and how it will affect other states, lets start by taking a closer look at the current situation.
Sports betting providers struggling in New York
The overall revenue from online sports betting in New York is not currently as high as it was when restrictions were first lifted. In January, the gross revenue reported revenue was $124.1 million while in May it was $109.8 million.
So, sportsbooks are making less money than they were, and they are struggling with the impact of paying 51% tax. This has led to several operators cutting back on the amount of money they spend on marketing and promotions so that they can continue to operate profitably.
How the New York sports betting tax rate compares with other states
The online sports betting tax situation in New York is very different to that in other states where rates are much lower. The average rate across all states where sports betting is legal is 19%.
In New Jersey, New York’s neighbor, the rate is 14.25%. This shows just how substantial the difference is. It’s also worth noting that New York includes promotional credits that sportsbooks give to players in tax calculations.
Will other states benefit from the high tax rate in New York?
If the tax situation in New York continues as it is, there is a possibility that sportsbooks will look to concentrate their efforts in other states. This could be an advantage to those states as they would have the potential to raise more tax without increasing the level of tax paid.
However, movements are being made to reduce the amount of tax paid by online sports betting operators in New York. Senator Joe Addabbo Jnr. and Assembly Member Gary Pretlow recently proposed new legislation regarding this matter.
This legislation would mean that the tax rate would reduce gradually as more operators enter the market. There are currently nine licensed operators under the umbrella of two providers. Under the proposed new legislation, if at least six further operators entered the market the tax rate would reduce to 25%. The legislation would also mean that promotional bets would no longer be subject to taxation.
If this new legislation is brought into law the sportsbooks in New York will likely remain in place and the situation in other states will be unaffected. Only time will tell if this happens.
The published material expresses the position of the author, which may not coincide with the opinion of the editor.