New York State Sets Final Tax Rates for Online Sports Betting

New York State Sets Final Tax Rates for Online Sports Betting

As New York gets set to join all the other places in the United States that have legalized and officially implemented online sports betting, they have taken yet another step toward finishing the entire process. It isn't one that will necessarily excite prospective bettors or sportsbook providers, but make no mistake, it is an important one—not to mention one of the last.

New York State has set final tax rates for online sports betting as of late October. Here's the thing: We don't yet know what those rates are. They only impact prospective betting providers, and because New York is still hammering out the bidding among commercial casinos and sportsbooks, they have so far kept the rate under wraps.

For bettors specifically, this may not seem very consequential. But it is. If New York's tax rate is extremely high, it could prove prohibitive when trying to draw in the business of top online sportsbooks. And if that happens, it could, in turn, slow the overall rollout process of legal online sports betting.

Is this actually what we should expect? Let's figure that out.

New York's Sports Betting Tax Rate

First and foremost, we have to answer the question of what exactly is a sports betting tax rate? In New York's case, it is a matrix—a table that will vary in scope and fees. Consider what was written over at Casino.org:

"The matrix is a table that has established proposed rates based on the number of platform providers and sports betting operators selected for award. Per the request for proposal solicitation released in July, the New York State Gaming Commission will select a minimum of two platform providers and four operators. It is possible for companies to serve in both capacities."

As part of this process, the NYSGC notified the remaining bidders for online sports betting "solicitation" what the different rates are currently projected to be. And these rates will amount to the fees every sportsbook provider pays on their revenue stream.

How High Could New York's Sports Betting Tax Climb?

Like we've already mentioned, the exact details of New York's sports betting tax rate remain unknown. But experts have predicted that they could rise to 64 percent of gross gaming revenue.

That is an extremely lofty tax rate when compared to other regions. For example, the state of Delaware, which is fairly close to New York, currently tops out between 14 and 20 percent. What New York is proposing more than triples the absolute peak of Delaware's sportsbooks tax.

Of course, New York has more leverage than most states when fielding bids from sportsbooks providers. They profile as one of the biggest, if not the absolute biggest, market in the sports betting field. Plenty of companies are tripping over themselves to have the ability to offer online sports betting in the state.

And that's the other part of this proposal worth noting: The 64 percent tax rate would only apply to the largest companies should New York accept their bid. We're talking about sports betting providers like DraftKings, FanDuel, BetMGM, Bally, etc. Smaller operations, such as Rush Street Interactive and Caesars Sportsbooks, would not be subject to such a lucrative tax rate.

Could New York's Proposed Tax Slow Legalization of Online Betting?

On the surface, it seems like the answer to this question should be yes. Any sportsbook providers interested in setting up shop within New York's state lines must approve the proposed tax rates before moving forward. They could all, in theory, come together and try to push back against such extravagant fees.

Spoiler alert: That won't happen.

Sportsbook providers are hell-bent on getting their foot in the door of New York's betting market. They are unlikely to quibble over this proposal. That's why New York set it so high in the first place. The 64 percent peak rate will surely weed out any unserious bidders.

And yet, even that's far-fetched. It'd be one thing if New York was proposing a straight 64 percent tax rate for all sportsbook providers. But since it's believed to be levying lower fees for smaller operations, they've likely ensured there will be minimal hesitance from every operator still in the running.

If anything, the second-tier providers like Rush Street and Caesars might be more emboldened to increase their initial bids knowing they won't see as much of their revenue stripped from them upon receiving a license. Select experts believe these companies would be taxed at a 50 or 51 percent rate—a significant difference.

When Will Online Sports Betting Officially Come to New York?

This is a question not even the top experts will dare to answer with any sort of certainty. New York still hasn't set a date on which they will assign the winning bids.

According to the time listed on the initial sports betting bill, the entire bidding process was supposed to last about 150 days. And since final bids were due in early August, an announcement should come shortly after the start of 2022.

Without knowing any inside information, this sounds about right. After all, the news that New York has informed bidders of their assigned tax rates suggests their decision-making process is winding down.

What that actually means for legal sports betting in New York is anyone's guess. If the winning bids are announced in January 2022, it will still take some time to get everyone set up and roll out the entire operation. That said, should the winning bids come that early into the New Year, chances are good that legal online sports betting will hit New York before the end of 2022.

Check out this list of the top online sportsbooks so you can decide which one to use when you're able to place online bets:

    View All Sports Betting Sites