TAX POLICY
attractive sports betting states given its population of nearly twenty million, wealth, and sports culture. 16 Pursuant to the legislation that legalized online sports betting in the state, the New York Gaming Commission was required to award licenses to at least two sports betting platform providers and four online sportsbooks to operate in the state. 17 The Commission approved ten-year licenses for two groups of gambling companies consisting of nine operators, leaving out a wide array of other popular sportsbooks who applied for licensure in the state. New Y0rk’s tax regime and total take: Strikingly different from New Jersey, New York taxes its operators’ gross gaming revenue from sports betting at a remarkable rate of 51 percent, which is among the highest rates in the country. Pursuant to the nine online sports betting licenses awarded by the New York Gaming Commission, each sportsbook operator in the state is required to hand over 51 percent tax of gross gaming revenue for a minimum of ten years. 18 To put this in perspective, the three largest mobile operators in New York, FanDuel, DraftKings, and Caesars all paid more than US$3 million in taxes to the state every single month in 2022. Furthermore, New York’s sports betting tax regime allows for no deduction of promotional credits including those issued by sportsbook operators in the calculation of the operator’s gross income. In effect, New York taxes operators’ “phantom revenue”. For example, if a wagerer receives a free US$100 promotional bet that they consequently lose, that US$100 is nevertheless included in the sportsbook’s gross revenue, even though no real money is being exchanged. In 2022, bettors wagered a total of US$16.7 billion through mobile sportsbooks during the market’s first year in operation. This translated into a total tax take on gambling revenue of
US$1.36 billion, due to the state’s extremely high tax rate and status as the largest state to allow sports betting. In January 2022, the first month of legalized sports betting in the state, New York’s sports betting revenue totaled US$124.1 million, more than double New Jersey’s revenue in the same month. 19 New York’s impact on New Jersey’s market New Jersey held the title of the number one sports betting market in the country for nearly three years, that is, until New York’s grand entrance into the market. As New York struggled to negotiate license agreements with prospective sportsbook operators in the state from mid-2018 until January 2022, New Yorkers were left with no other option for online sports betting than to head across the Hudson River by car or make the trek via train into New Jersey. As one journalist noted, “For a few cagey gamblers from New York, the mighty span is the most convenient sports book and casino in the region.” 20 Some bettors even saved on the US$16 toll and train fare by taking a fifteen minute trek via bicycle to cross state lines and place their bets. Before sports betting operators finally made their debut in New York, an estimated 20 percent of New Jersey’s sports wagering action came from bridge-and-tunnel bettors traveling from New York. Mobile sports betting in New York exploded at remarkable rates when it was first offered, and the state quickly secured the number one spot for online sports wagers across the board among states for monthly handle, operator revenue, and tax revenue. 21 Concerns that the New Jersey sports betting market would suffer significantly after New York joined the market soon faded when it set a record- breaking handle in the same month. In fact, New Jersey’s sports wagering handle has showed no signs of slowing with sports betting handle in both 2021 and 2022 totaled
16 FORBES (Nov. 8, 2021), https://www.forbes.com/sites/willyakowicz/2021/11/08/new-york-picks-draftkings-fanduel-and-others-to-launch- states-mobile-sports-betting-program/?sh=520eeb031a08. 17 N.Y. Assemb. B. A3009, Gen. Assemb., Reg. Sess. (passed by assembly Jan. 20, 2021). 18 FRONT OFF. SPORTS (June 21, 2022, 6:08 PM), https://frontofficesports.com/sports-betting-operators-struggling-with-new-yorks-high-tax- rate/; Robert Linnehan, New York Online Sports Betting Licenses Awarded to Nine Operators, AMNY (Nov. 8, 2021), https://www.amny.com/ sports/new-york-online-sports-betting-licenses-awarded-to-nine-operators/. 19 See GAMBLING.COM (Feb. 17, 2022), https://www.gambling.com/us/news/new-jersey-handle-still-impressive-but-new-york-tax-numbers- are-gaming-changing-3046300. 20 David Waldstein, At the George Washington Bridge Casino, Your Bets Are a Bike Ride Away, N.Y. Times (Nov. 8, 2021), https://www.nytimes. com/2021/10/10/sports/football/nfl-gambling-bridge.html. 21 BLOOMBERG (June 17, 2022, 7:00 AM), https://www.bloomberg.com/news/articles/2022-06-17/n-y-sportsbooks-limit-promos-ask-for-tax- breaks-as-losses-rise?leadSource=uverify%20wall.
PAGE 65
IMGL MAGAZINE | APRIL 2023
Made with FlippingBook flipbook maker