New York Sportsbooks Struggling to Make Profit

Sportsbook Operators in New York Struggle to Make a Profit

By Amelia Walker Senior Content Writer Updated: 08 June 2024

Amelia Walker Senior Content Writer

Amelia Walker is a Senior Content Writer at Betting.US. She has a law degree and deep knowledge of the gambling laws in the United States. Her mission is to keep players informed about responsible gambling, while her passion for sports helps her create useful guides. Amelia has over a decade of experience in betting, which has positioned her as a trusted voice among our readers.

See Full Bio

A Hefty Tax Burden Due to Tax Rate in New York

A recent report by Deutsche Bank analyst Carlo Santarelli looked into the financial issues facing sportsbook operators in New York. According to Santarelli’s findings, the operators allocated 22 cents for every dollar toward promotional activities.

However, with the hefty tax burden set by the state, operators are then left with just 27 cents to cover essential expenses such as employee salaries, marketing costs, technological advancements, and tax obligations to the federal government. The analyst stated:

As it pertains to New York, promotions, relative to other states, have been lessened, though we don’t believe the offered odds are materially different than neighboring states.

Despite the challenges posed by New York’s tax rate, the state’s massive market potential continues to attract operators eager to tap into its vast customer base. However, the high tax burden has forced operators to adopt a more conservative approach to promotional spending, prioritizing cost-effective strategies over extravagant giveaways.

Unlike in states with lower tax rates, where operators can afford to be more generous with their promotional budgets, New York’s operators have been forced to carefully allocate their resources to maximize their returns.

Hugely Competitive Market in New York

Officials said that competition is already very stiff in New York, with industry giants like DraftKings and FanDuel leading the way.

In New York, the two operators dominate the sector, with a large share of both the market and promotional spending. While smaller players like Penn Entertainment’s ESPN Bet and BetMGM are said to have carved out their own niches, they still face an uphill battle against the industry giants.

Figures show that despite the challenges posed by New York’s tax regime, major operators like DraftKings and FanDuel have managed to adapt and maintain profitability in the state. The hold, or the amount of money retained from bets, remains slightly higher in New York compared to the national average, indicating that operators are still able to generate revenue despite the tax burden.

However, some officials believe that the resilience of operators in New York could set a precedent for other states looking to maximize their tax revenue from sports betting. States like Illinois and Massachusetts are closely monitoring New York and have been considering similar tax hikes to boost state finances.

Some proposals, like Massachusetts’ brief consideration of a 51 percent tax rate, have been met with resistance. However, the potential impact of such changes on the sports betting industry has now become a subject of ongoing debate, according to reports.