New York tops sports betting tax revenue as promotions shrink
As May revenues crossed a significant threshold, the New York betting frenzy slowed. When it launched in January, the state saw an average weekly handle of $406 million, the industry term for total wagers. That figure has been dropping steadily over the past few months to $293 million per week in May.
For Alan Woinski, CEO of Gaming USA Corporation, the drop is partly due to the sports cycle: betting tends to slow down after the end of March Madness and the end of the NFL and pick up again in September. But accelerating the downturn could be the drop in promotions offered to customers.
“Especially in New York, a lot of companies are starting to cut back their promotions drastically because they’re losing so much money,” he said. “Every time they cut promotions, you’re going to see a significant drop.”
The latest data shows that the New York market is dominated by FanDuel, with 39% of bets going to the platform. DraftKings follows with a 24% share. Although the pair dominates the domestic betting market, it has yet to make a profit, largely due to high tax rates and massive promotions offered during launch periods. The other seven platforms licensed to operate in New York, including Caesar’s and BetMGM, are also not profitable.
According to Woinski, recent data shows that while gaming platforms have been able to reduce the cost of promotions while maintaining a strong user base, the industry’s tax structure makes profitability a fantasy for most companies, especially in New York.
“Maybe they could turn a profit in a good week of football,” he said. “But over a year, they probably won’t make any money.”
In the coming months, companies are more likely to see profitability in states with big bets but lower taxes. New Jersey leads the nation with $27 billion in all-time sports betting, but the state takes just over 12%. Indiana, Nevada and Colorado all have even lower tax rates, below 10%.
As New York lawmakers praise the new record, it gives pause to those advocating for stronger gambling addiction programs. The Northeast Problem Gambling Resource Center saw a 50% increase in calls in the first quarter of 2022 compared to the same period in 2021, and Brandy Richards, the organization’s team leader, said the proliferation of sports betting in line worried him.
“It really attracts a lot of new and younger people who have never been involved in the game,” she said. “Every time you increase the accessibility of something, you increase the likelihood that there will be a problem.”