New York’s recreational cannabis and online sports betting programs will be a steady stream of revenue for the state for years to come, but which newly approved activity will be more beneficial for the state in terms of tax revenue?
When both programs are at full maturity in several years New York online sports betting is estimated to out earn medical marijuana by several hundred million dollars in tax revenue, according to a report from Thomas P. DiNapoli, State Comptroller.
NY Online Sports Betting Should Outperform Cannabis Sales
Both the legalization of recreational marijuana and online sports betting were approved and included in the state’s $212 billion fiscal year 2021-2022 budget. Sources estimate New York’s online sports betting program could begin taking wagers in late 2021, with a more likely date of Feb. 13, 2022, the date of Super Bowl LVI.
Recreational cannabis sales likely won’t begin in the state until December 2022, according to New York Magazine’s Intelligencer.
DiNapoli estimates online sports wagering will bring in more than $357 million in tax revenue for the state in fiscal year 2022-2023 compared with $115 million in tax revenue from recreational cannabis sales.
|Estimated Revenue for Adult-Use Cannabis||$20,000,000||$115,000,000||$158,000,000||$245,000,000|
|Estimated Revenue for Online Sports Betting||$99,000,000||$357,000,000||$474,000,000||$493,000,000|
While the recreational cannabis program will need several years to mature, estimated revenues for the state in 2024-2025 are purely in favor of online sports betting. DiNapoli’s revenue estimates have online sports betting outperforming recreational cannabis by more than 100% when both programs are operating at full capacity.
Where Does the Revenue Go?
Recreational cannabis retail sales will be taxed at a rate of 9% in the state, which will go to the state’s cannabis revenue fund. An additional 4% tax on retail sales will be dedicated to local governments.
The cannabis revenue fund will be used to pay the costs of various state agencies for the implementation and evaluation of the effectiveness of the cannabis law. Of the remaining funds, 40% will go to the state lottery, 40% will go to a community grants reinvestment fund and 20% will go to the drug treatment and public education fund.
The minimum tax rate in the state for online sports betting has been set for platform providers at 13%. However, this will likely be driven much higher once the bidding process begins, as representatives have said in previous reports they expect nearly a 50% to 55% tax rate.
According to DiNapoli, 1% of receipts in 2021-2022 and $6 million annually thereafter will be deposited in a commercial gaming fund for problem gambling education and treatment. Additionally, 1% of receipts in 2021-2022 and $5 million annually thereafter will be deposited in the general fund for statewide youth sports and education grant programs.