The New York State Gaming Commission has revealed the nine operators that have received only sports betting licenses. A consortium featuring Bally Bet among others was successful in its “super bid”.
Four additional bids were unsuccessful, resulting in disappointment for Barstool Sportsbook, Fanatics Sportsbook, Bet365, FOX Bet, and theScore. Because just nine operators were licensed, it means that they will be required to a pay 51% tax rate on gross gaming revenue.
Gross gaming revenue is charged before promotions are taken into consideration. That is important because many other states take their cut after promotions are factored in.
Tough to Make Money in New York
It means that online sportsbooks in the Empire State will need to hand over $0.51 on every $1 they hold. New Hampshire is the only other state in the country that demands such a large tax rate. They must also pay a $25 million licensing fee, so it will be tough for them to make any money in New York.
“I don’t think a single operator will make money in New York,” said Jay Snowden, chief executive of Penn National Gaming, which was ultimately unsuccessful in its bid for a license for Barstool Sportsbook.
New York Assemblyman Gary Pretlow, a leading proponent of online sports betting, was disappointed that only two of the six bids were successful. The tax rate would have dropped to 35% if they had all been approved.
Pretlow fears the sportsbooks in New York will now need to offer unattractive odds to make it commercially viable to operate in the state. He worries that this will cause sports fans to continue heading to New Jersey to place bets, or to visit offshore sites. It could also mean that New Yorkers do not benefit from the sort of eye-catching bonuses available across the country.
A Large Addressable Market
Many online sportsbooks operators do not seem particularly bothered about earning a profit right now. They are mainly focused on securing market share. In states where they can bring down their tax obligation by investing heavily in promotional credits, they have readily grasped the opportunity.
In New York, that will not be possible. They will need to find a way to cover the $25 million licensing fees, and they may be deterred from operating at a loss, so they could rein in the promos.
It will be difficult for them to offer poor lines, as bettors would simply go elsewhere. That is the case in Washington DC, where bettors have little interest in the large vigorish charged by Gambet DC, which has a monopoly on online sports wagering in the District.
Yet they will also need to work hard to stand out. The market will be less competitive than in states like New Jersey, Pennsylvania, Colorado, and Arizona, but nine sportsbooks are still reasonably competitive.
For that reason, they should still offer appealing sign-up bonuses to New Yorkers. We might not see the sort of lucrative promos that DraftKings has unveiled recently – such as the opportunity to bet $5 on any NFL team winning a game at moneyline odds of 40/1 (+4000) – but we should still see some compelling risk-free bets and deposit match offers.
It is worth noting that New York is the fourth largest state by population and third by GDP. Its GDP is roughly the size of New Jersey, Pennsylvania, and Colorado combined, and the state is full of pro sports teams. If they attract enough customers, the sportsbooks will be able to offer reasonably attractive bonuses and still cover their licensing fees and meet their tax obligations.