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New York Seeking a 50% Tax Rate On Sports Betting Providers

New York State Gaming Commission unveils requirements for prospective sports betting license applicants
State seeking applicants that are willing to be taxed at a rate of at least 50 percent on gross gaming revenue
Gov. Andrew Cuomo believes sports betting could bring up to $500 million a year in tax revenue to the state

As the state with the second-biggest population in the US behind California, New York has always been seen as a big fish by those in the sports betting industry. Neighboring New Jersey has become a hotbed for sports betting since the Garden State legalized the activity a couple of years ago. It stands to reason that New York, which has over twice as many residents as New Jersey, would instantly become the dominant state in the market once sports betting is legalized.

However, the state’s government has been slow to get its act together with regard to legalization. Governor Andrew Cuomo has been particularly stubborn amid legalization efforts, though perhaps the state is finally starting to come around.

Requirements For Applicants

Last Friday, the New York State Gaming Commission revealed application rates for parties interested in acquiring sports betting licenses. The Commission posted the figures on its website. The state is looking to attract sports betting operators willing to be taxed at a rate of 50 percent or higher of their gross gaming revenue in addition to a $25 million application fee. Any successful applicant will then acquire a 10-year license.

Applications are due by August 9. Following a series of reviews and oral arguments, the Gaming Commission will choose finalists by December 6. Those finalists will then receive a week in order to hand in their formal applications. The licenses will be awarded at a subsequent meeting, though no date has been set for that as of yet.

Those in favor of legalizing sports betting are hoping to have the industry up and running in New York by the time next year’s Super Bowl takes place in February of 2022.

🚨 New York Sports Betting legalization News!

💸 Operators applying for a license must agree to a 50% tax floor on revenue… https://t.co/jKnvjjGvvN

— JGS (@JGSventures) July 9, 2021

The commission was hoping to be able to call for applicants to apply by July 1, but the process was delayed without explanation. Any and all applicants are going to be subjected to an initial review process before they can be formally considered for a license. Applicants and their operating partners must have some experience in the sports betting space. Those that have already agreed to revenue-sharing pacts with local Native American gaming operators will be given extra consideration.

Any provider that agrees to the aforementioned 50 percent tax would gain 20 points on their application score. Any provider willing to go even higher than 50 percent will receive an extra point for each percentage point north of 50. Any provider that seeks a lower tax rate will have points deducted, however.

Haggling Over Cuomo’s Plan

Governor Cuomo has long seen the 50 percent tax rate as a sticking point in negotiations. Cuomo only recently came around on the idea of allowing New Yorkers to legally wager on sports via mobile devices. He finally came around on the idea as a result of the massive financial losses the state took after the pandemic. In search of additional sources of revenue, Cuomo came around on mobile betting.

If New York moves forward with that 50 percent tax rate, it will easily rank among the highest rates in the US for sports betting. New Hampshire has been taxing sports betting revenues at a national-high rate of 51 percent, while Pennsylvania is next-highest at 36 percent. New Jersey taxes revenues at a 13 percent clip, while Indiana is at just 9.5 percent.

Cuomo prefers a plan that involves sports betting companies working directly with the state government to provide sports betting options for consumers. However, some lawmakers in the state prefer an alternative approach being used in a number of other states. That plan calls for operators to open up their doors by offering licenses through land-based casinos.

The state gaming board commissioned a study in January that found that New York could generate over $850 million in gross revenue for operators via a digital sports betting industry. Cuomo’s plan, however, estimates that the state would take in $49 million in taxes for 2022 with over $350 million the following year. Once the market is fully up and running, Cuomo believes sports betting could bring a $500 million annual windfall to the state.