By STEVE BITTENBENDER
THE CENTER SQUARE CONTRIBUTOR
(The Center Square) — Online sports betting has been operational in New York for less than five months. Still, in that time, the state has already exceeded other states in one key category: tax revenue generated.
Democratic Gov. Kathy Hochul announced Tuesday, citing data from the New York State Gaming Commission, that the state has received $263 million from online operators. That’s since the first operators launched Jan. 8.
“In less than half a year, New York has become a leader among states in implementing successful gaming policies, with hundreds of millions of dollars going to important programs that will improve the lives of all New Yorkers,” the governor said in a statement.
The results are not necessarily surprising. New York is the most populous state in the U.S. to offer sports betting, and the state’s 51% rate on revenues from online operators is significantly higher than most other states. Only New Hampshire and Rhode Island levy a similar rate, and those states have their lotteries run sports betting solely.
In New York, a competitive bidding process last year led to the Gaming Commission approving two bids representing eight platform providers and nine companies to operate sportsbooks in the state.
The high tax rate was the brainchild of former Gov. Andrew Cuomo. He insisted on a minimum 50% tax for operators while negotiating with lawmakers on the 2021-22 fiscal year budget. In the bidding process, operators were required to propose their tax rate. In return for proposing a 50% or higher rate, winning bidders received 10-year terms for the licenses, costing each platform provider $25 million.
Sports betting had been legal in New York since 2019, but it was only allowed at commercial and tribal Class III casinos, all located in upstate New York. Until early this year, most downstate New Yorkers who wished to bet legally went across the Hudson River to wager in New Jersey.
Gov. Cuomo had been cool about allowing online gaming in the state, but his position changed after the COVID-19 pandemic as the state faced a likely budget shortfall.
Including the taxes generated by New York’s retail sportsbooks, which pay only a 10% tax, the state has received more than $267 million in revenue. Pennsylvania, where legal online and retail sports betting has been operating since 2018, has generated $253 million. New Jersey, which saw its first legal sportsbooks open nearly four years ago, has taken in $229 million in taxes.
New York’s release does not count Nevada, where sports betting has been legal since 1949. Most other states only became eligible to legalize sports betting after the U.S. Supreme Court ruled the Professional and Amateur Sports Protection Act of 1992 unconstitutional in May 2018.
While the state celebrates its rapid rise to the top, operators have been pushing back against the tax rate since the January launch. However, efforts to lower the rate so far have not been successful.
Earlier this month, BetMGM, one of the larger operators in the country and New York, announced that it was reducing its marketing spending to acquire new bettors in the state, citing the high tax rate.
“We simply can’t apply our capital against an irrational investment thesis,” BetMGM CFO Gary Deutsch said during the sportsbook’s Investor Day presentation on May 12. “Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”