After ‘astonishing’ rollout, New York mobile betting faces fiscal season challenge

New York officials celebrated a $70 million tax windfall from mobile sports betting this week, and revenue figures released Friday show newly legalized games continued to cash in during Super Bowl week. . While Governor Kathy Hochul’s office presented the numbers as a “record success” A battle with gambling companies over the 51% tax rate on betting revenue looms during upcoming state budget negotiations.

State Sen. Joseph Addabbo Jr., chairman of the Senate Racing, Gaming and Betting Committee, said he has received calls in recent weeks from some of the nine state-licensed mobile sports betting operators expressing their dissatisfaction with the tax rate, a claim he called “premature.”

“You can’t negotiate something and say 30 days later ‘you know what I’m not crazy,'” Addabbo told City & State. “That 51% is something the state was very clear about from the start…there’s no secret, no surprise here.” Addabbo said he plans to introduce a bill in the Senate to freeze the tax rate once operators get contracts. Assemblyman Gary Pretlow, who chairs the body’s gaming committee, introduced a similar bill just days after mobile sports betting was allowed to begin legally on Jan. 8.

Since then, mobile sports betting companies have collected $154 million in revenue through Feb. 13, the New York State Gaming Commission reported Friday, which equates to $78 million in taxes for the state and far exceeds the $48 million projection of the Statement for the fiscal year ending March 31, according to the state comptroller’s office. Addabbo called the numbers “astonishing” and “an excellent baseline to build on.”

Most of that money will go to education, in accordance with a constitutional amendment passed by voters in 1967 that created the New York State Lottery and requires a portion of lottery proceeds to fund schools. One percent of funds raised in the current fiscal year will also be used for problem gambler programs, and 1% will go to youth education programs. In subsequent years, $6 million will go to problem gambling programs and $5 will go to youth sports. The rest will be distributed to the state education budget.

The initial success of mobile sports betting may not be as earth-shattering as state lawmakers have portrayed it to be, experts have warned. Early earnings are likely inflated by promotional betting aggressively offered by gambling companies vying to attract customers and market share.

“It’s a little early to tell, because I think there’s a huge amount of promotion, and at some point these companies will have to look at their bottom line, because I don’t know how much money they’re actually making right now” , Peter Warren, research director for the conservative think tank, the Empire Center for Public Policy, told City & State, adding that “New York is clearly a huge market for mobile sports betting and at least for the right now, even a 51% tax rate doesn’t seem to retard its development much.”

New York has the highest tax rate of any state offering mobile sports betting except New Hampshire, which also taxes 51%. Unlike some other states where mobile sports betting is legal, promotional betting in New York is also subject to the 51% tax rate.

“Every business needs a chance to make a profit,” said Jason Robins, CEO of DraftKings, one of New York’s mobile gaming operators. Action Network the Friday following the release of an unflattering earnings report. “New York’s tax rates make it difficult to make money compared to other markets with lower tax rates.”

While Addabbo said it was firmly committed to the 51% tax rate on gross revenue for the existing nine operators, there could be flexibility regarding the tax rate on promotional bets. He also said his bill could include a provision to reduce the gross income tax rate if more operators are added.

“The Governor’s administration, along with the Gaming Commission and the Legislature, must stand ready to do everything in their power to ensure that New Yorkers have the best product possible in a highly competitive marketplace. I am therefore ready to listen, certainly ready to receive all the ideas. So let’s see where this budget negotiation goes,” he said.