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In recent weeks, BetMGM announced plans to stop offering certain welcome bonuses in the state of New York. Other books could soon follow suit, if they haven't already.
The problem: New York sportsbooks are taxed at 51%. In an exclusive interview with long time gambling attorney I. Nelson Rose, he revealed that the New York tax on sportsbooks is more like 71%.
Rose explained at the time that he was seeing a 65% figure from newspaper reports and then explained there is a federal excise tax of 0.25%.
"This may not sound like a lot but it is when you consider each bet," Rose points out to Gambling911's Thomas Somach. "This is win or lose and not on gross gaming revenue. That amounts to another 6%. So a 65% rate becomes 71%."
While it's true that 65% quoted in some of the local papers may have been on the high side at the time Rose gave his assessment, State Assemblyman J. Gary Pretlow, co-chair of the State Racing and Wagering Commission, suggests it's easy to hit that percentage range when offering the welcome bonuses.
“If a sportsbook, let’s say Caesars for instance, gave you a $3,000 bonus on top of the $3,000 you deposited, then Caesars has to pay a 51 percent tax on the full $6,000,” Pretlow tells Casino.org. “The way the law is written, it does not differentiate between bonus funds and actual funds. Everything extra they gave you goes to the state, and they lose more than 3K.”
Most of the advertisements have also dried up as a result.
Pretlow offered a solution that would involve lowing the tax rate to 37 or 38 percent, still among the highest in the nation but much better than 51% and up.
“We’re assessing the situation, and I am hopeful for a tax decrease,” Pretlow said. “I want to see the best odds available to New York customers, and that would result from more competition.”
Easier said than done. At the time mobile sports betting legislation got pushed through, then Governor Andrew Cuomo only gave lukewarm approval. He initially deemed the activity in violation of the state constitution, but eventually came around.
Any amendments must be approved by a majority of the state legislature, and it doesn't help that the state legislative period is usually only in session the first five months of the year.
Whether other lawmakers get on board remains a question mark as well. It's not as if the state isn't benefitting from sports betting. $2.4 Billion in wagers came in the first 5 Weeks of launch. Cutting out a significant amount of tax revenue just so that BetMGM and others can offer a larger welcome bonus might not win over a majority of lawmakers. These big brands are essentially captives in one of the nation's biggest markets. Even if one were to drop out, another would simply fill the void.
It should also be noted that a number of offshore sportsbooks, BetOnline included, have opted not to accept customers from New York.
- Gilbert Horowitz, Gambling911.com
