A top regulator in New York said Jan. 31 that it is too early to tell whether the state's year-old mobile sports betting program—which saw about $16.6 billion in total handle since last January—is having an effect on advanced deposit platforms for racetrack betting.
"I'd reserve comment until we have a little bit more data,'' Robert Williams, executive director of the New York State Gaming Commission, told a legislative panel looking into the experience of mobile sports betting in the state.
But it was not too early for top mobile sports betting company heads to make a strong pitch—with some not-so-veiled warnings—to lawmakers that Albany must soon lower the state's 51% tax rate on gross gaming revenues of the betting operators.
Just two weeks after New York governor Kathy Hochul hailed the success of the mobile sports betting industry's first year in the Empire State, the leaders of FanDuel and DraftKings said long-term growth of the program in the state is not sustainable under the current high tax rate.
While already becoming the nation's largest mobile sports betting market, the two companies told Senate and Assembly racing and wagering committee members that the growth in New York has slowed from its initial few months a year ago.
FanDuel's Christian Genetski said New York will have had a "fleeting achievement" in its early successes if the taxes are not lowered.
Genetski, who said his Manhattan-based company has more than 40% of the mobile sports betting market share in New York, said there are "clear signs" New York's sports betting has already peaked.
"The New York market is not growing handle or customer base like every other state,'' he told lawmakers. "New York is on the wrong trajectory."
Jason Robins, the CEO and chairman of Boston-based DraftKings, said New York's 51% tax rate compares with an average of 13% across the nearly two dozen states with mobile sports betting programs. He said the nine operators in New York are at a "massive disadvantage" when it comes to competing with illegal, off-shore betting companies.
Desperate to get into the large New York market, DraftKings and FanDuel and other industry players less than two years ago reluctantly acquiesced to the mobile sports betting package put together at the time by then-Gov. Andrew Cuomo and state lawmakers. Cuomo at the time insisted the program was about driving tax revenues to the state, not boosting the profits of mobile sports betting operators.
The demands by FanDuel and DraftKings yesterday, and threats of action, are not unique among betting sectors in New York: full-fledged casinos and racetrack-based VLT casinos had similar tax-lowering demands in recent years in a market heavily saturated in most parts of the state with wagering options.
But Genetski and Robins used the legislative hearing to outline what they say will happen in New York if the tax rates they pay aren't lowered. Company-funded marketing and advertising initiatives will be cut. Promotional credits used to attract customers will be reduced. Customers in New York could face worse odds on their sports wagers on events compared with bettors in other states. FanDuel has already shaved its investments in New York compared with other states, Genetski said. Some operators could simply just leave the New York market, he warned.
The idea of a lower tax rate for the industry has gotten initial traction with senator Joseph Addabbo Jr., a Democrat from Ozone Park (Queens), and assemblyman Gary Pretlow, a Democrat from Mount Vernon, the influential chairs of the Senate and Assembly racing and wagering committees in the legislature. Addabbo recently introduced a bill lowering the tax rate from 51% to 35% if the number of operators in the state is increased from nine to 14. With 15 or more in operation, the rate would drop to 25%.
The industry's tax cut pitch, however, will not go over well with many lawmakers, especially those on the political left who traditionally oppose the idea of big tax cuts for businesses at the expense of revenues to pay for popular programs such as education.
One moderate lawmaker on the Assembly racing and wagering committee expressed concerns about the sports betting industry's claims that cutting the 51% tax rate—estimated to cost the treasury $600 million next year in revenues—will provide far more in tax revenues in the long term via what executives call a more financially healthy business tax model.
"Call me skeptical...I think this is a leap,'' she told the sports betting executives after they made their pitch Tuesday morning.
Asked by state senator James Tedisco, a Schenectady County Republican, why the state should lower the mobile sports betting tax rate given the success of the industry in its first year, Williams the state regulator said: "That's obviously a legislative prerogative."
The numbers have been eye-popping in New York's first year of mobile sports betting. The state alone brought in $909 million in tax and licensing fee revenues. A total of 3.8 million unique player accounts were created, with 1.2 billion separate sports betting transactions conducted, Williams noted in a separate written report submitting to the committees. The state, which heavily regulates the industry in New York, approved 1,001 separate wagering variations on more than 20 sports—from major pro sports to cornhole and snooker. Direct betting on horse racing is not permitted, though legislation has been pending to permit fixed-odds Thoroughbred wagering via mobile sports platforms.
"It's been a great year for mobile sports betting,'' Addabbo, an early supporter of the wagering program in the Legislature, said during the hearing. He added lawmakers should not yet say the program, as adopted in 2021, will stand unchanged in the future and that there will be more work to help with issues of gambling addiction.
Still, he said of the first year's financial numbers in New York: "We can be amazed at these numbers and proud of these numbers."
