A committee to award New York online sports betting licenses took a large step forward today in its decision.
As first reported by Tom Precious of the Buffalo News, New York regulators have determined a “final tax rate matrix,” or final tax rate, that all bidding groups have to meet to be considered for a New York online sports betting licenses.
A representative from the New York Gaming Commission confirmed the report with Elite Sports New York.
NYS regulators have come up with a "final tax rate matrix" that mobile sports betting bidders must be able to meet. Bidders given til next Monday, 5pm, to amend their proposals if their plans don't match the tax rate levels.
— Tom Precious (@TomPreciousALB) October 19, 2021
The final tax rate set by the New York State Gaming Commission is 64% for the minimum of two platform providers and four operators.
The bidding groups have been alerted of the state’s final tax rate and now have until 5 p.m., Monday, Oct. 25, to amend their bids if their proposed tax rates are not as high.
The RFA for sports betting licenses noted that at least a 50% tax rate should be included in a group’s bid, so it’s safe to assume to the chosen tax rate will likely be higher.
If the bidding groups choose to not amend their tax rate bids to reach the tax rate set by the state, the group will be disqualified from further consideration for a license. However, just because a group agrees to the targeted tax rate does not mean it will automatically receive an online sports betting license.
The New York Gaming Commission has until early December to award the online sports betting licenses. However, with the final tax rate matrix being determined and bidding groups being alerted, the process could speed up significantly from here.
Six Bidding Groups for Online Sports Betting Licenses
The gaming commission received six bids – three from singular companies and three group bids – to offer online sports betting in the state. The gaming commission must select at least two platform providers (the technology the online sports betting program will use) and four platform operators (the forward-facing skins for customers) from the submitted bids.
Here is what we know about the bid packages gleaned from the redacted bids (which can all be found here). State revenue details and proposed tax rates are listed for bids that provided the information.
Bid 1: Bet365 (Primary Applicant)
- Proposed tax rate: Unknown
- Projected revenue to New York: Unknown
Bet365 is listed as the only operator and provider in the bid. Most of the bid’s information was redacted, but Bet365 touted its customer base of 63 million as a primary driver of its popularity.
The company noted it has marketing agreements with the Yankees, Mets and Jets. It has current signage agreements at Yankees Stadium, CitiField and MetLife Stadium.
The group has no revenue sharing agreements in place with any Native American tribes in the state.
Bid 2: Kambi (Primary Applicant), Fanatics Sportsbook and Penn National Gaming
- Proposed tax rate: Unknown.
- Projected revenue to New York: $1 billion in incremental tax revenue over the next 10 years.
Kambi is listed as the bid’s platform provider, with Fanatics Sportsbook and Penn National Gaming serving as the group’s platform operators.
Penn National Gaming and the Fanatics Sportsbook entered into revenue sharing agreement with the Saint Regis Mohawk Tribe. The agreement includes a 5% revenue share and a minimum guaranteed annual payment of $2.5 million regardless of Penn and Fanatics performance in the New York market.
Jay-Z was listed as the Vice Chairman of Fanatics Sportsbook in the group’s bid for a license. According to the application, he will provide strategic and creative direction on the expansion and growth of the Fanatics Sportsbook in New York and across the country, per the company.
Bid 3: FanDuel Sportsbook (Primary Applicant), DraftKings, BetMGM, Bally Bet
- Proposed tax rate: 50%.
- Projected revenue to New York: See Below.
FanDuel Sportsbook is listed as the group’s primary applicant, but all four companies, including DraftKings Sportsbook, are listed as platform providers and platform operators in the bid package. This would provide New York with up front licensing fees of $100 million.
The group commissioned a revenue report from Frontier Economics Analysis of the state’s mobile sports wagering market. Here is what the report notes New York could expect in online sports betting tax revenue in the first five years if the group’s bid was accepted:
- Year 1: $585 million
- Year 2: $929 million
- Year 3: $1.352 billion
- Year 4: $1.639 billion
- Year 5: $1.753 billion
According to information in the bid package, the four companies represent 78% of the U.S. online sports betting market. The group did not advocate bringing in additional platform operators for customers.
“A higher tax rate or accepting additional operators will inhibit the market by creating economically unfeasible conditions,” the group wrote in its bid package.
The group noted it has a revenue sharing agreement in place with Seneca Nation of New York.
Bid 4: FOX Bet
- Proposed tax rate: Unknown.
- Projected revenue to New York: Unknown.
FOX Bet is listed as the application’s sole provider and operator. The vast majority of information in the bid has been redacted, so very little is publicly known about the company’s plans for New York.
The company lists a partnership with the New York Post as a marketing piece.
Bid 5: Kambi (Primary Applicant), Caesars, Wynn Interactive and PointsBet
- Proposed tax rate: 51%
- Projected revenue to New York: $892.5 million in sports wagering taxes per year with nine operators versus a projected $808 million in sports wagering taxes per year with the minimum number of four operators.
Kambi, Caesars, Wynn Interactive and PointsBet are all listed in the bid as platform providers, which would provide New York with $100 million in up front license fees.
The bid includes a possible nine platform operators that would project to $892.5 million in sports wagering taxes per year. If the gaming commission only selects four operators, it would project to $808 million in taxes per year for the state.
“The data shows that there are diminishing returns once enough operators with the financial resources and customer bases are included. For example, in New Jersey, the top nine operators generated 98.9% of the mobile wagering revenue (Source: Eilers & Krejcik Trailing Twelve Months Ending May 2021).” The group wrote in its bid.
The group has partnered with the Oneida and St. Regis Mohawk Compacted Tribes in a revenue sharing agreement. Each tribe will receive a guaranteed revenue stream plus shared upside with the licensed operators based on performance.
According to information in the bid, the Oneida Indian Nation will deploy 100% of proceeds from its revenue sharing arrangement into community programs for Oneida’s New York residents.
Bid 6: theScore
- Proposed tax rate: Unknown
- Projected revenue to New York: Unknown.
theScore is listed as the bid’s primary provider and operator. The company was recently acquired by Penn National Gaming and it’s unknown at this time how the company’s bid will be affected.
The company currently offers online sports betting in New Jersey, Colorado, Iowa and Indiana.
The company noted it has executed several marketing campaigns in Canada, which recently legalized single-game sports betting.
