New York Tax Collectors Make Bank on State’s New Legal Sports Betting

New York is home to one of the country’s highest tax rates on a so-called ‘sin tax.’ The state levies a 51 percent tax on the gross revenue of sports betting operators.

AP/Sue Ogrocki
According to state officials, New Yorkers bet $2.6 billion on baseball at the state's new legalized sports books in the first 10 months of 2022. AP/Sue Ogrocki

New York State tax collectors will be getting a big cut of the largest sports betting market in the country as the first year of legal gambling draws to a close in the Empire State.

In the first 10 months of legal sports betting in New York, sportsbooks saw over $1 billion in revenue collectively, according to a new report from the American Gaming Association.

After launching in January of 2022, New York quickly became the largest slice of a market that has ballooned to $5.76 billion nationally — a 78 percent increase in revenue over 2021. The handle — the total amount of money in wagers —  also grew dramatically in 2022 to $73.11 billion nationally, a 70 percent increase from 2021.

According to the state, baseball was the most popular sport to bet on with $2.6 billion in wagers being placed on MLB games. Basketball was a close second, at $2.5 billion, and football was third, with $1.3 billion in wages when the reporting period ended, only two weeks into the NFL season.

The amount is still only a fraction of wagers placed on extralegal sports betting sites, which the gaming association estimates to be around $337.9 billion every year.

Because the report’s data ended in October, New York bookies are likely to take home considerably more than the $1 billion they made in the first 10 months of the year, and the government of New York will be taking home most of that profit.

At a November announcement, state senator Joseph Addabbo, a major advocate for sports betting in the state, said that the state had already collected over $500 million in tax revenue from sports betting.

“That is an incredible achievement — especially in only a 10-month timespan with only nine operators — with the majority of this money going towards the state’s educational coffers, gaming addiction programs, as well as youth sports programs,” Mr. Addabbo said.

New York is home to one of the country’s highest tax rates of a so-called “sin tax.” The state levies a 51 percent tax on the gross revenue of sports betting operators. The only other state with a tax rate taking a majority of revenue is New Hampshire, with a 51 percent tax rate on gambling operators. New York’s neighbors, New Jersey and Pennsylvania have a tax rate of 14.25 percent and 36 percent respectively.

An advocate for legal sports betting in the state assembly, Assemblyman Gary Pretlow, said that the legalization of online sports betting in New York has been a net positive for the state.

“I’m elated with the success of mobile sports betting in New York but not surprised,” he said. “This endeavor has been a win/win for New Yorkers as we have generated millions in revenue for education and youth sports while not turning a blind eye to responsible gaming programs.”

While the legalization of sports betting has strong support in Albany and in most state houses around the country, it also has its opponents and critics.

A 2021 report from the National Council on Problem Gambling said many bettors do not understand the way that gambling works and that sports bettors are more likely to exhibit “problematic play” than non-bettors.

“It’s this ticking time bomb,” the executive director of the National Council on Problem Gamblin, Keith Whyte, said. “We have to take action now, but the problem is almost impossible to quantify.”

Early in the year, observers like the analysts at Regulus Partners had worried that the high tax rate would discourage investment in the market and called New York’s sports betting market “dead on arrival.”

Instead, sports books raced to capture market share in the Empire State, recognizing it would likely become the largest legal sports betting market in the country. Any New York based sports fans knows that sports books have flooded broadcasts with advertisements touting promotional offers, some of which exceed $1,000 in matching funds for bettors.

The strategy for the sports books is to capture as much of the market share as possible in New York with the hopes that they will be able to keep it as more operators enter the market.

There are currently nine operators in New York, which is why the current tax rate sits at 51 percent, down from 64 percent when there were only four operators. Once the state reaches 13 total sports book operators, the tax rate will drop to 35 percent, the lowest that the state has considered to date.

Of the sports books operating in New York, FanDuel, DraftKings, and Caesars are the largest, raking in $6 billion, $4.2 billion, and $2.6 billion in wagers respectively in 2022. New York has seen a total of $15.15 billion in wagers placed.

According to a September Pew Research report, around one in five Americans say they have bet on sports in the past year, with private bets between friends and family still being the most popular way to gamble.

The survey also found that although around one third of Americans believe the legalization of sports betting is bad for society, the majority of Americans have a neutral opinion on legalization and a small minority believe it is positive.

It appears that other states are looking to follow in New York’s footsteps, with efforts to legalize sports betting well under way in Maine, Ohio, and Nebraska. In Florida online sports betting was briefly legal in late 2021 but now stands in legal limbo.


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