How much is New York losing to New Jersey sports betting?

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According to a recent report, bettors from New York account for 40% of business at the land-based FanDuel Sportsbook at the Meadowlands Racetrack in New Jersey. Around 10% of the handle at Atlantic City casino sportsbooks come from New Yorkers, who also make up 8% of the sports betting traffic at Monmouth Park. If you add up the numbers from 2019, NY residents wagered $179 million at land-based New Jersey sportsbooks. These figures come from Eilers & Krejcik Gaming, which is an independent research firm.

Some 25% of the handle at FanDuel’s online betting service and 20% at the digital DraftKings Sportsbook equivalent came courtesy of New Yorkers. That equates to $657 million in wagers and $42.8 million in revenue coming from New York bettors in 2019.

The big question is, how much revenue is New York losing? That is not easy to tell, but authors Chris Grove and Chris Krafcik made a conservative estimate for New York of an 8% tax rate for bets made at retail locations and 12% when it comes to mobile betting. Both of those figures are slightly lower than the New Jersey numbers of 8.5% for retail and 13% for mobile. If plugging in the New York rates, the state would have lost $6.3 million in potential tax revenue last year. The authors estimated that figure could be $11 million by 2022 if the New York Legislature does not take action on the matter.

New York State Senator Joseph Addabbo stated, “The data proves what we all expected to be true: New York is missing out on hundreds of millions of dollars in revenue by failing to regulate mobile sports betting. In light of the state’s multi-billion dollar budget deficit, it would be irresponsible not to capture this revenue.”

New York Assemblyman Gary Pretlow added, “This report makes it crystal clear that while the legislature has not voted on mobile sports betting, huge numbers of New Yorkers are voting with their feet and heading to New Jersey to place their wagers.”

The report by Grove and Krafcik included three options for sports betting taxes that could be considered by New York’s elected officials. The first is based on the 8% and 12% tax rates and seven licenses being issued, three for New York tribes and four for the land-based casinos located in upstate New York. The projected annual tax revenue would be $119.2 million as well as a one-time license fee of $12 million.

The second scenario would increase the tax rates on mobile bets to 15%, which would then increase the annual revenue to the tune of $139.5 million. In the third scenario, the New York City metropolitan area would get three additional gaming licenses, but those casinos would have to be built. If there were three casinos in the area the number increases to $166.2 million.

Grove and Krafcik write, “Our conclusion is that the scenario with the highest number of eligible operators and the lowest tax rate produces the most revenue for state government.” They went on to write in the report, “Additionally, a low-tax, high-competition environment should capture the maximum amount of demand that currently flows to illegal bookies and offshore sportsbooks. Capturing more demand from the illegal market means that more consumers will enjoy the safety and protections of a regulated market while also cutting down a source of revenue that has historically been attached or at least adjacent to organized crime.”

Looking at six countries in Europe and their tax rates, which range from 10-20%, would be “optimal for the purposes of maximizing illegal market capture”, according to the report. If the tax rate was higher than that it could have an effect on the affordability of marketing for sportsbook operators. Grove and Krafcik write that if the rates were higher, bettors may think twice before switching from illegal sports betting markets to a legal one.

The New York casino tax rate for gross gaming revenue is around 40%, which is quadruple the number that is charged in New Jersey and Nevada. Because of this, New York legislators may want the higher number for sports wagering as well.

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