{"id":4923,"date":"2022-02-21T02:54:13","date_gmt":"2022-02-21T10:54:13","guid":{"rendered":"https:\/\/wagers.com\/staging\/4285\/?p=4923"},"modified":"2022-02-21T03:34:13","modified_gmt":"2022-02-21T11:34:13","slug":"sports-betting-tax-rates-operators-hope-for-the-best","status":"publish","type":"post","link":"https:\/\/wagers.com\/staging\/4285\/news\/sports-betting-tax-rates-operators-hope-for-the-best\/","title":{"rendered":"Sports betting tax rates: operators hope for the best"},"content":{"rendered":"

If there is one issue that is guaranteed to get online sports betting executives complaining it is taxes and if one was to survey the US industry for its biggest business gripe, New York\u2019s 51% tax rate would very likely take top spot.\u00a0<\/span><\/p>\n

In fairness, many non-US industry observers were also surprised when news of the New York OSB tax rate first came out. Indeed, such levels of taxation are more common in Europe and even in the US, New York by some distance is the highest taxing jurisdiction for online sports betting (Pennsylvania is second at 36%).\u00a0<\/span><\/p>\n

Recent comments from senior industry executives, DraftKings CEO Jason Robins being the latest to mention the topic during the group\u2019s call with analysts on Friday, have also brought the issue into focus.\u00a0<\/span>Howard Glaser, Global Head of Government Affairs at Scientific Games, also laid out the figures in a <\/span>LinkedIn post<\/span><\/a> ahead of <\/span>New York\u2019s latest weekly betting statistics. <\/span><\/p>\n

He said the state\u2019s Gaming Commission would not break out \u201cits Super Bowl betting numbers as a separate line item in their weekly report\u201d, but it was \u201ca safe bet they will blast by every other state, likely doubling New Jersey\u2019s haul of $144 million and surpass Nevada\u2019s position as the leading legal super bowl sports bookie.\u201d\u00a0<\/span><\/p>\n

Beer mat maths\u00a0<\/b><\/h4>\n

As Wagers.com Earnings +More reports today<\/a>, New York handle was up <\/span>31% to $472.1m during Super Bowl week (ending Feb13), revenue was down 39.7% to $15.4m. Meanwhile, <\/span>Geocomply data showed that the amount of bets placed by New Yorkers on the Super Bowl accounted for around 20%, or 20 million geolocation transactions, of all the US bets placed on the event.\u00a0<\/span><\/p>\n

From those numbers, Glaser calculates <\/span>that if New Jersey\u2019s average bet is \u201c$16 per person to New York\u2019s 20 million bets, the Empire State could have bet up to $320m, a truly \u2018Super\u2019 performance for a state that didn\u2019t have sports betting just a few weeks ago – and more than the total of ALL states in last year\u2019s Super Bowl\u201d.\u00a0<\/span><\/p>\n

Glaser then takes a stab at working out New York\u2019s tax take from Super Bowl LVI: \u201cThe average gaming revenue hold over 10 states was about 8%, for New Jersey it was 18%. Let\u2019s take a more conservative 10% for New York\u2019s $300m in wagers. At the state\u2019s 50% tax rate, that\u2019s a one event payback to the state of $15m. By contrast, last year Illinois took in just over $1m. And Nevada? About $850K.\u201d\u00a0<\/span><\/p>\n

Following the release of the official numbers, Glaser’s figures are pretty much spot on, but they also give a measure of the revenues at play for state authorities.\u00a0<\/span><\/p>\n

Stranger things<\/b><\/h4>\n

Coming back to Jason Robins, he commented on Friday that there had been \u201cchatter around New York considering adjusting the (51%) tax rate down\u201d. <\/span>But referring to the comments, the team at Deutsche Bank said this was highly unlikely, because:\u00a0<\/span><\/p>\n

    \n
  1. instances of states lowering taxes are few and far between,<\/li>\n
  2. the market is only five weeks old,<\/li>\n
  3. the operators literally bid for the existing tax rate.<\/li>\n<\/ol>\n

    \u201cWe see the potential risk of tax increases in several other states as far more likely than a reduction in New York, and as such, we view the tax dynamic as a far greater risk than opportunity,\u201d said the DB team.<\/p>\n

    It added that\u00a0\u201cinstances of states lowering tax rates on gaming are few and far between, the market is literally five weeks since launch, and the operators bid the tax rate that exists.\u201d<\/span><\/p>\n

    This point was also made by Global Market Advisors director\u00a0 Brendan Bussman during a webinar last month. \u201cName me one legislator who wants to reduce taxes on something and doesn\u2019t enjoy revenue,\u201d he said.<\/span><\/p>\n

    Clout call\u00a0<\/strong><\/h4>\n

    Just as important however, New York is showing other states, in this case we are of course alluding to the three other \u2018majors\u2019 that are California, Texas and Florida; that operators will apply for licenses, and because of their scale and potential market size, the states have the clout to set high tax rates and books will, for the most part, agree to them.\u00a0<\/span><\/p>\n

    This also goes for the other big population states; think Illinois at 15% or Michigan at 8.4%, while the \u2018soon-to-be\u2019 states like Georgia, Ohio or North Carolina might also look to New York for inspiration when it comes to OSB tax rates. <\/span><\/p>\n

    As DB commented, \u201cthe\u00a0 potential risk of tax increases in several other\u00a0 states\u201d was \u201cfar more likely than a reduction in New York, and as such, we view the tax\u00a0 dynamic as a far greater risk, than opportunity.\u201d\u00a0 \u00a0\u00a0<\/b><\/span><\/p>\n

    Bussman understandably was critical of the high taxes. He said: \u201cIf you want the private sector involved, you\u2019ve got to give them the runway to do it. When you sit there and put tax rates over 50%, the only winners are the states. You don\u2019t have a dynamic market. You don\u2019t have a competitive market.\u201d\u00a0<\/span><\/p>\n

    This is true and already four betting brands account for around 91% of New York handle. But it’s worth pointing out that this lack of competitiveness also occurs in states where the tax rates are much lower. In addition, the New York authorities would probably respond that it isn\u2019t their problem, generating high tax revenues is.\u00a0<\/span><\/p>\n

    Numbers illustrated<\/strong><\/h4>\n

    Another illustration of the difference in tax revenues comes from <\/span>the New York executive budget. The state forecast it would recoup $249m in taxes from sports betting in 2022, this includes the $200m in licensing fees that have already been collected. <\/span><\/p>\n

    By 2027, New York expects the OSB market to generate around $520m in annual tax revenues, with the total from 2022-27 set at<\/span> $2.6bn. By way of comparison, New Jersey\u2019s December betting handle was $1.2bn, <\/span>but its tax take in 2021 was $102.6m.<\/p>\n

    The numbers illustrate that the bigger states have the clout to set high tax rates if they wish to, that includes the \u2018big four\u2019 but could easily be applied to the following 10-15 jurisdictions that have already regulated or are about to.\u00a0<\/span><\/p>\n

    The point has been made many times before, but operators have become so used to pulling marketing levers to attract players that in the long term New York-like tax rates might also force them to focus on their core business of producing quality OSB products. <\/span><\/p>\n

    Indeed, same game parlays, prices, trading or risk management capabilities \u2013 all will have to be at their absolute best to generate the margins and profits that the markets expect.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

    If there is one issue that is guaranteed to get online sports betting executives complaining it is taxes and if one was to survey the US industry for its biggest business gripe, New York\u2019s 51% tax rate would very likely take top spot.\u00a0 In fairness, many non-US industry observers were also surprised when news of […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[324],"tags":[590,867,1000,782,2,781],"class_list":["post-4923","post","type-post","status-publish","format-standard","hentry","category-news","tag-draftkings","tag-illinois","tag-michigan","tag-new-jersey","tag-new-york","tag-pennsylvania"],"_links":{"self":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/4923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/comments?post=4923"}],"version-history":[{"count":6,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/4923\/revisions"}],"predecessor-version":[{"id":4946,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/4923\/revisions\/4946"}],"wp:attachment":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/media?parent=4923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/categories?post=4923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/tags?post=4923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}