New York Warned of Risk of Implementing Hefty Sports Betting Taxes

New York skyline

Since the Supreme Court decided to overturn the 1992 federal ban on sports betting, many states have tried to implement sports betting laws as fast as possible.

New York had hoped to be one of those states to take advantage of early adoption, but failed to push the legislation through in time. Now there are calls for hefty sports betting taxes to be avoided when a bill eventually comes to fruition.

New York sports betting

East coast states Delaware and neighbors New Jersey quickly rolled out sports betting at the start of June. Other states already had legalized sports betting before the Supreme Court decision in anticipation of this change.

Now the likes of West Virginia, Pennsylvania and Mississippi are all offering or close to offering sports bets. New York hoped to be among them, but missed the window in which to push through this legislation.

Senator John Bonacic and Assemblyman Gary Pretlow had submitted the bills, but after extensive debates in the state, no consensus was reached on any version of a sports betting bill.

A law had been passed in 2013 that permitted certain types of sports betting in New York, but it was nothing major.

A loophole in state law had been explored that might have seen sports betting legalized before the next legislative window. It have would seen upstate casinos being allowed to offer sports betting, but not for those college events taking place in the state or involving a college from the area. However, there has not been much of a push for this to happen to date.

The New York State legislature closed for the summer break before a bill could be approved, despite extensive debates. The next session will not be held until the start of January 2019.

Integrity fees

One of the big issues that were up for debate as part of the recently proposed sports betting bill was that of integrity fees.

Major sports organizations, namely the MLB and NBA, had been pushing hard to get their cut of sports betting revenues from betting operators.

They would receive this money in return for supplying their intellectual property such as league data to the operators, with the money being used to ensure that the integrity of their sport was upheld.

The proposed bills did have provisions related to integrity fees. The last bill to be debated had a provision that would see 0.2% of every wager going towards these leagues.

No other state to date has included integrity fees in their final bills. If they were implemented in New York, this would be a powerful case that the leagues could use in the future when lobbying other states.

Calls for lenient taxes

A non-profit group in New York called the Citizens Budget Commission (CBC) has published a short report, titled “Hold Your Bets”, that discusses its views on sports betting bills. The group makes four main points in the report.

The CBC wants to ensure that forecasts for potential revenue to the state are kept conservative. It wants the implementation of taxes to ensure that there is a competitive environment, rather than have a situation where taxes could cripple the sector.

It is requesting a study into how the introduction of sports betting in the state would affect other forms of gambling revenue. Lastly, it wants the taxes to be regressive and for proceeds of tax revenues to be used to help mitigate any subsequent social costs.

CBC was formed around 1934. It claims to be a non-profit and non-partisan group whose interest is ensuring that the services and financial situation of the state are constantly being improved.

It has no stance in favour or against sports betting legalization, but wants to ensure that if a bill is approved that the adequate protections are implemented.

Different approaches

To date, there have been many different approaches taken by states when it comes to sports betting taxes. Officials in Pennsylvania, for example, have propped a hefty 51% tax on revenues, which would be crippling for operators.

Others such as Arkansas are proposing a tax of 13% on the initial $150m (£116m) of revenues, with this being upped to 20% for anything over this amount.

With illegal sports betting being such a popular pursuit, if taxes on legalized betting are substantial, it will act as a disincentive for people to leave the illegal offshore parties they are currently using. Current estimates show that between $2.8bn (£2.2bn) and $8.7bn (£6.7bn) is wagered on illegal sportsbooks annually in New York.

If tax rates were lower, there would inevitably be more money spent on technology and marketing, as well as creating odds that are competitive.

If taxes are hefty, fewer people will get involved in the sector, there will be less capital investment and they will not be as competitive overall in their offering compared to offshore operators.