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Operators bidding to offer mobile sports betting in New York could have to pay a tax rate as high as 64 percent on gross sports-betting revenues, according to a report on Tuesday.
The Buffalo News reported that the New York State Gaming Commission (NYSGC) has released its “final tax rate matrix” to applicants, giving interested bidders until 5pm on Monday to amend their bids to fit the commission’s tax-rate requirements.
A copy of the matrix published by the Buffalo News proposes a 64 percent tax rate if there are four or five operators in the state, decreasing slightly as more operators are added down to a 50 percent tax rate for up to 12 operators and 35 percent if more than 12 operators are chosen.
A spokesman for the commission declined to comment.
Per the terms of a request for applications released this summer, the move means that the commission has selected at least one of the six applications for potential licensure and met the requirement to select at least two platform providers and four sports-betting operators or skins.
The action comes earlier than expected, as the commission was not required to make selections until December 6 and its timeline dictates that license awards should occur at the commission’s next regular meeting, which has yet to be scheduled.
The final tax rate matrix is determined by using the highest tax rate for each potential number of platform providers and operators from among the proposals submitted by the selected applicants.
Each applicant was ranked by a technical score, with applicants receiving 60 of a potential 75 points then receiving a pricing factor score based on the proposed tax rates they submitted. The commission then used those combined scores to select the applicants for the first-stage potential licensure that would also then form the final tax rate matrix.
The applicants now have the opportunity to amend their bids to conform to the new tax rate matrix.
Those that do not will be disqualified from consideration, but those that do will be eligible for the additional license consideration stage, whereby the commission can continue to select the next highest ranked technical scoring applicant if it determines selecting that applicant to be in the best interests of the state, in terms of generating additional revenue.
The six submitted applications included three joint bids between multiple operators and three individual operator submissions.
Two of the bids would by themselves meet the state’s requirements — the first being the consortium of FanDuel, DraftKings, BetMGM and Bally Bet; and the second being a group that includes Kambi, Caesars, PointsBet, WynnBET, Rush Street Interactive and Resorts World.
Kambi also submitted another joint bid with Penn National Gaming’s Barstool Sportsbook and the deep-pocketed newcomer and sports retail giant Fanatics, but that bid alone would not satisfy the requirements and would need additional applications to be selected.
Bet365, Fox Bet, and theScore also submitted individual applications.
A 64 percent tax rate would be, by far, the highest competitive tax rate in the United States to date. Several states, including Delaware, New Hampshire, and Rhode Island, have tax rates or revenue shares around 50 percent, but each state also offers a monopoly to the operator with which the state partners.
The highest tax rate for a state with a competitive sports-betting market is Pennsylvania, which taxes operators at 36 percent.
That rate was initially decried by many operators as laughable upon passage of legislation in 2017 but many operators have ultimately obtained a Pennsylvania license anyway, attracted in part by deductions for promotional credit that decreases the effective tax rate.
In contrast, the NYSGC has already told operators that no promotional deductions will be permitted.
Further, New York platform providers will be required to pay a $25m upfront license fee, as well as a share of the $20m in annual payments to the state’s four upstate casinos where servers will be located in order for mobile sports betting to be compliant with the state constitution.
