DraftKings CEO: High Taxes Will Suppress Sports Betting Promos In New York

Online sports bettors in New York could see fewer promotions than their fellow punters in other states. Operators expect their NY sports betting revenue to be taxed at a rate of 50-51%, making long-term profitability an uphill climb.

“If we were to be awarded a license, I think we feel just like we do in other states that we can achieve the same long-term profit margins in New York,” DraftKings CEO Jason Robins said during his company’s Q3 earnings call.

“There’s a lot of levers we can pull, such as cutting back on the rate of promotion, and spending less on external marketing. Those are things I would expect everybody in the industry to do, because I don’t think anyone’s going to want to run long-term at an unprofitable rate in any state.”

Sports betting in NY: A tough buck

Robins’ words echo the recent sentiments of Penn National Gaming CEO Jay Snowden.

“The state is going to make money,” Snowdwen said during Penn’s Q3 call. “I don’t think a single operator will make money in New York.”

Even so, the goal of policymakers is to ensure that local bettors stay in-state to make their wagers. They don’t want customers going to New Jersey, Pennsylvania, Connecticut or their illegal bookie.

“Our customers deserve a premier product,” NY Sen. Joseph Addabbo told playin-ny. “And you know they’ll drop it in a millisecond and go back to what they’ve been doing the previous three years if it’s not good enough. So we better come out swinging.”

The rubber meets the road

The expectation among industry sources is that regulators will choose nine operators — comprising both the FanDuel and Kambi consortiums — at a 51% tax rate.

“Certainly early on we’ll approach it just like we do other states where we’ll invest into it, and look to that two-three year path of profitability,” Robins said.

“But I think over the long-term we feel we can achieve something in a similar range to what we’re achieving in other states from a long-term margin perspective.”

The NY State Gaming Commission is slated to address the consideration of mobile sports wagering license recommendations at its Monday meeting. The winning bidders must be disclosed by Dec. 6, but some have recently begun to speculate that an announcement could be more imminent.

The hope is that the first legal online bet will be placed sometime during the NFL playoffs in January, with operators fully up and running by the Super Bowl on Feb. 13.