Assemblyman Pretlow Introduces Bill Amendment That Would Lower 51% Tax Rate

New York online sports betting operators could end up getting some tax relief after all.

Assemblyman Gary Pretlow introduced a bill amendment in the assembly that would effectively lower the 51% tax rate for online sportsbooks in New York by adding additional skins over the next two years. Sen. Joe Addabbo has likewise introduced a matching bill amendment in the senate.

The bill calls for the Empire State to go from nine NY sportsbooks to no fewer than 14 by Jan. 31, 2024 (which would lower the tax rate from 51% to 35%) and no fewer than 16 by Jan. 31, 2024 (which would lower the tax rate from 35% to 25%).

“Gary and I always had this vision of increased skins. One of the differences we had with the Cuomo administration when we drafted the mobile sports betting language was (the) lack of number of skins. And amazingly, we’ve done this well with only seven (recently eight) active. But that just goes to show you that more skins would possibly make us even more competitive,” Addabbo told playin-ny.

“Because we’ve already seen how it’s working, and we’ve got to think long-term with the idea being — and I’ll leave it to the fiscal people — to figure out if we increase the number of skins can we then lower the tax rate but still keep up that educational funding and tax revenue stream. If that is the case, then that’s a formula we should entertain.”

NY sportsbooks want 51% tax rate to change

New York sports betting operators have made no secret of their disdain for the state’s 51% tax rate — the highest tax rate in the country. A rate that could prohibit sportsbooks from being sustainable and profitable over the long haul.

Granted, they also knew what they were signing up for going in. That’s why local policymakers don’t want online sports betting operators to call for any tax rate percentage reductions themselves. And the state has already generated $104.4 million in tax revenue off $3.16 billion in NY online sports betting handle taken from Jan. 8 to Feb. 27 (including nearly $1.5 billion over the first 27 days of February).

Recently, DraftKings’ CEO Jason Robins mentioned that there had been “chatter” surrounding the notion that state policymakers could look to reduce the tax rate. Robins has repeatedly stated DraftKings hopes to be profitable in NY in two to three years.

Pretlow had been vehemently against the plan set forth by former Gov. Andrew Cuomo’s administration, preferring a more open model similar to neighboring New Jersey. The Garden State’s model features a more open market and a 13% tax rate.

Applicants that did not receive licenses by the New York State Gaming Commission would be eligible to re-apply. Bet365, Fanatics, Penn National Gaming/Barstool Sports, Fox Bet and theScore Bet all were left out. Also available to apply: operators who elected not to participate in the original bidding process.

Gaming diversity important to local policymakers

In addition, Pretlow’s bill pushes for the inclusion of minority-controlled online sports betting operators. Fanatics, which was left out, planned to have Jay-Z as vice chairman of Fanatics Sportsbook in addition to serving on its board of directors. Minority policymakers in the state have expressed disappointment with the lack of minority representation within online sports betting operator licensees.

Fanatics spent $1,000 each to lobby friends of Addabbo and Pretlow on Jan. 11 and Jan. 14, respectively, according to the New York State Board of Elections public record. Fanatics has spent a total of $52,000 lobbying in New York.

According to Pretlow’s bill:

IF THERE IS AN ENTITY COMPRISED OF NO MORE THAN SIX INDIVIDUALS  QUALIFIED  AS  MEMBERS  OF  A MINORITY  GROUP AS DEFINED BY SUBDIVISION EIGHT OF SECTION THREE HUNDRED TEN OF THE EXECUTIVE LAW WITH A DIRECT OR INDIRECT ECONOMIC INTEREST  OF AT LEAST FIVE PERCENT IN THE APPLICANT. THE COMMISSION SHALL ADVANCE FOR A LICENSURE AT LEAST TWO APPLICANTS HAVING SUCH QUALIFIED MINORITY INVESTMENT. THE  COMMISSION  SHALL  MAKE DETERMINATIONS TO AWARD A LICENSE OR

DISQUALIFY THE APPLICANT ON A ROLLING  BASIS  TO  EXPEDITE  ISSUANCE  OF ADDITIONAL LICENSES AND MAXIMIZE REVENUE TO THE STATE.

Pretlow’s bill amendment also enables online sports betting operators to deduct promotional play. Currently, they are taxed on it.

“I’m an optimistic guy, but I’m a realist, so I don’t know (if it will go through),” Addabbo said. “If the intent is with the NYS Gaming Commission and the governor’s office to have this conversation, we should have it. But if there’s not, then we’re going to stick to the 51% and the sound, solid base that we’ve already formed with mobile sports betting in NY.”