LSR: Legislators unlikely to turn around New York tax rate

LSR: Legislators unlikely to turn around New York tax rate

Episode 149 of the Legal Sports Report went over the 51 percent tax rate in New York and the position it leaves operators in.

Starting off with BetMGM having second thoughts about the situation after initially agreeing to pay the rate, Adam Candee said it is ‘pointing the obvious’, commenting: “We looked at the New York tax structure right when it came out – 51 percent, the highest of in the nation – and said that we’re not sure how anyone is going to make money in New York.”

And yet, Candee noted, there were still more applicants than the state of New York chose to put into the market. Referring to BetMGM’s recent investor call, he continued: “They gave some quotes that to me sounded like ‘what did you expect?’. They essentially said that the house can’t always lose and that it’s not an environment that’s sustainable when it comes to the tax rate in New York.

“Fair. No one involved in this believes that 51 percent is a reasonable tax rate, but the problem here is that you proposed it, you agreed to it. What do you think anyone is going to do when you come back and say ‘we can’t afford it’? You had a chance to say you didn’t want to pay this tax rate in the first place,” Candee said, pointing out the missed opportunity.

He added: “But there are other questions to be answered here that go a lot deeper. What is the lifetime value of a player that you acquire in New York? How hard do you have to work to keep that player at potentially a lower cost than acquiring a new player?

“There are a lot of questions to be answered, but I think the one we can answer definitely is, are the New York legislators going to come back and change the tax rate that the sportsbooks agreed to five months ago? No, they’re not.”

Author: Erika Simmmons