The Auburn Citizen reported that at a recent legislative hearing the CEOs of the two operators, have urged lawmakers to reduce the 51% tax on gross gaming revenue (GGR) as it is the highest among states that have legalized mobile sports betting.

DraftKings and FanDuel Warn of 10-20% Drop in Sports Betting Handle

In the first year of mobile sports betting in New York, more than $16.5 billion was wagered and the state collected over $709 million in revenue. However, DraftKings and FanDuel believe that this high tax rate could potentially harm the state’s success in the long run.

The president of FanDuel, Christian Genetski, and the CEO of DraftKings, Jason Robins, warned that if the tax rate remains the same, the state’s mobile sports betting handle could decrease by 10-20% annually. They argued that with the high tax rate, there would be less money spent on marketing and promotional credits, leading to fewer options for consumers and a lower-quality betting experience.

Robins explained that the 51% tax rate actually equates to an effective tax rate of over 70%, which he views as unsustainable for DraftKings. He also warned that if the tax rate is not adjusted, DraftKings may have to reconsider its marketing partnerships with sports leagues and teams, and bettors may move their wagers to offshore markets or illegal markets.

Genetski brought up France as a cautionary tale to New York, highlighting the situation in the European country which imposed a similar high tax rate on sports betting as New York. Despite a promising start in France, a number of operators left the market due to the unfavorable tax rate, resulting in a decline in revenue.

According to Genetski, adopting a tax rate closer to Pennsylvania’s 36% tax rate could bring significant changes to New York’s long-term success in the sports betting industry. It will also benefit the state’s fiscal projections and provide a better betting experience for customers.

Senator Joseph Addabbo Has Proposed a Bill as a Possible Solution

In response to these warnings, State Senator Joseph Addabbo, who chairs the Senate Racing, Gaming, and Wagering Committee, has introduced bill that lowers the tax rate if more operators join the New York market.

The tax rate would decrease to 50% with 10-12 operators, 35% with 13-14 operators, and 25% with 15 or more operators. However, the senator acknowledged that the bill’s fiscal implications are still under review and that reducing the tax rate could potentially lead to less money for education.

The senator has also stated that it is very difficult for politicians to go to their constituencies and reveal that they have done something, which effectively has brought down the funding that goes to support education.