Numbers Down During Busy Season
Despite New York being the largest and most successful sports betting market in the country, its recent trends suggest that volatility within the market may be on the rise. After surpassing the $10 billion all-time handle mark, the state has trended downward in weekly handle since the NFL season started.
The New York State Gaming Commission updates their weekly handle and revenue report regularly. It shows that between Sept. 5 and Sept. 11, New Yorkers wagered $329,981,056. On Sept. 8, the first game of the NFL season kicked off, which lends itself to the strong weekly performance of almost $330 million. That was the highest weekly handle that New York had posted since early May (unsurprising given the slow summer months), however it was nowhere near their weekly record, despite it being the most popular season to bet.
Then, from Sept. 12-18, the handle from online sports betting dropped to $296,669,770, or down roughly $33 million. What’s most perplexing about that figure isn’t the handle itself, but that revenue totaled roughly $40 million, which is the second-highest weekly revenue record since launch.
The following week (Sept. 19-25) showed a slight uptick from the previous week, but still lower than Week 1. During all of this, the Buffalo Bills played two primetime games, which present prime (literally) betting opportunities. Plus, the Yankees Aaron Judge has been chasing a home run record all while the college football season started. Why then, is this the outcome?
The data clearly shows that a 51% tax rate does NOT work—especially if promo credits are taxed at 100%. As predicted, operators cannot afford to invest in promos, ads, or other tools necessary to develop the NY market—which is leading to materially lower handle figures.
— Jeremy Kudon (@JKudon) September 23, 2022
Tax Rate To Blame?
One of the biggest discussions surrounding New York sports betting concerns the country-high 51% tax rate. New York also taxes operators on their promotional spending, which results in fewer promotions for customers, which in turn incentivizes fewer users, and thus a smaller handle. Over time, operators have offered fewer and fewer promotions because of how it’s affecting their long-term profitability. Which, at least in part, explains why handles have decreased over time. If these trends continue then operators could make a case for reducing the state tax rate.
In an effort to thwart this eventual outcome, Assemblyman Gary Pretlow introduced a bill in March that would lower the 51% tax rate. It would have increased the number of sportsbooks to a minimum of 14 operators by 2023 subsequently reducing the tax rate to 35%. Then by 2024, the minimum number of sportsbooks would increase to 16 and the tax rate would lower to 25%. The bill did not pass. However, Pretlow has exclaimed on several occasions that alongside Sen. Joe Addabbo, he will be heading back to the drawing board to revisit the tax rate situation.
Others, such as sports betting legislation expert Jeremy Kudon tweeted that New York’s mobile sports betting framework is “broken.”
“The data clearly shows that a 51% tax rate does NOT work—especially if promo credits are taxed at 100%. As predicted, operators cannot afford to invest in promos, ads, or other tools necessary to develop the NY market—which is leading to materially lower handle figures,” Kudon tweeted.
Kudon seems to back Pretlow’s failed bill, suggesting to add operators, lower the tax rate, and take away the requirement for operators to pay 100% tax on their promotional credits.