Penn CEO: No Money To Be Made For Sports Betting Operators In New York

Penn National Gaming CEO Jay Snowden doesn’t think online sports betting operators will be able to make money in New York under a tax rate that will likely be 50% or higher.

Industry sources believe that the two so-called “Super Bids” will be accepted, potentially leaving Penn on the outside looking in. The company’s Barstool Sportsbook brand is part of a bid with compelling player Fanatics, which has yet to publicly secure an operator for its platform.

“The state is going to make money. I don’t think a single operator will make money in New York,” Snowden said during his company’s latest earnings call. “So I’ve always struggled with that. Would you rather be in or not?

“I think objectively speaking, you’d probably rather be in than not be in. But it’s one of those states where if you’re not in, you’re not crushed by it either.”

The NY State Gaming Commission has until Dec. 6 to select applicants for online sports betting licenses. But it sounds as though they could pick winners this week, if not soon thereafter.

Penn’s prospects in New York

Barstool Sportsbook is licensed to operate in New Jersey, which features more competition and a more modest 13% tax. The NJ sports betting market just cleared $1 billion in handle in September, with as much as 20-25% of the total being attributable to New York residents.

There have been rumblings that sports betting operators in NY won’t offer as many deals as in other states. But New York also has incentive to keep its customers from doing business in neighboring states or with illegal bookmakers.

“A lot of New Yorkers live in North Jersey and Manhattan where it’s easy to get over (the bridge),” Snowden said. “And I think that competitively New Jersey is just going to be able to do things and offer things that New York can’t.

“New York has their own prerogative in terms of how they want to structure the law and they’re pursuing that,” he continued.

“If we’re in, we’ll play by the rules. I think that if we end up as one of the operators in New York that, if nobody can make money, we’ll lose the least because we can rely on the Barstool audience organically and turn that on and active it in ways that we’ve done in other states without having to get into the paid media shotgun approach.”

State lawmakers hoped to craft a model similar to New Jersey’s, but former Gov. Cuomo’s administration insisted on a high tax rate of at least 50%.

Pay to play in NY sports betting

If there are nine operators — FanDuel, DraftKings, BetMGM, Bally’s, Caesars, PointsBet, WynnBet, BetRivers and Resorts World — the matrix requires a 51% tax on gross revenue. If Fanatics (or any other operator) is included as a 10th, the tax rate would dip to 50%.

“I don’t know who’s going to be able to afford doing really any of that given the tax rate would be the highest in the country, or at least tied with New Hampshire,” Snowden said. “And we know DraftKings has been clear that it’s very difficult to make money in New Hampshire. It’s a long answer because it’s a pretty complicated issue.”

DraftKings returns just over 50% of its sports betting revenue in New Hampshire to the state in exchange for a monopoly there.

No competitive sports betting market has a tax rate higher than the 36% in Pennsylvania.

Lead photo: Arvind Balaraman | Dreamstime