Online sports betting has only been legal in New York for one year, so it was no surprise that top executives from FanDuel and DraftKings had mixed views on the impact these new laws have had in the largest US sports betting market to date.
During a hearing called by New York lawmakers Sen. Joseph Addabbo and Assemblyman Gary Pretlow on Tuesday, both DraftKings Cofounder and CEO Jason Robins and FanDuel President Christian Genetski expressed their opinions and predictions regarding the future success of online sports gambling within New York—both agreed that unless regulations are modified to lower the state’s imposed 51% tax on operating revenues, drastic changes need to be made for a sustainable future.
As chairpersons of the gaming committees in their respective chambers, Addabbo and Pretlow played an integral role in ushering in 2020’s wave of sports gambling regulations, introducing innovative methods of play such as mobile wagering; How these regulations will look one year down the line remains to be seen.
Decrease In Spending For Fanduel
FanDuel New York has made the surprising decision to spend less money on promotional advertising in New York, despite the state being one of their highest-performing markets. This contrast is especially pronounced when compared to states like Maryland and New Jersey, where FanDuel spends three times more per capita on ads.
“I think we’d be forced to take the actions or some set of the actions, we described by making the odds worse for consumers, having the promotions be nonexistent or at least heavily dialed back, (and) cutting relationships with teams and local marketing partners,” CEO Jason Robins said. “We would make nowhere near the total amount of revenue and profit that I think we could make in a more favorable setup, but at least we would be able to have a sustainable market.”
To curb this disparity and generate more revenue in New York, lawmakers have proposed a tax rate reduction from 15% to 35%, in exchange for new licenses being released. While the plan may help resolve economical disparities, some are skeptical that it will lead to substantial change. It remains unclear what implications such a shift may hold for FanDuel or other sportsbook operators in the Empire States.
A Contradictory Proposal
New York faces immense budget deficits in the future, despite federal aid in the short term as a result of COVID-19. This has led to some debate about cutting the sports betting taxes for economic gain. The idea was proposed by FanDuel, which believes that with a 35% rate, it would be able to invest up to $250 million over three years in promotional spending and advertising — helping them add 300K customers and generate $350 million in gross revenue.
However, this proposal could be received with resistance due to its counterintuitive nature at a time when the state budget is struggling immensely. The budget deficit that New York faces is an immense challenge that will necessitate hard decisions and changes that not everyone may agree on — such is the case with this proposed tax cut.