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FanDuel-led bid proposes 50% tax rate for NY mobile betting

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The New York State Gaming Commission has published details on the six bids to operate mobile sports betting in the state, with one bid from four of the country’s largest operators proposing a 50% tax rate.

Under New York’s mobile betting rules, the state must select two platform providers, which together must offer at least four skins. Players, however, may only have one account per platform provider.

Last week, the state published the applicants involved in the six bids that had been accepted.

One of the bids is led by FanDuel – which will also see Bally’s, BetMGM and DraftKings enter the market. While FanDuel had been listed as the platform provider and the other parties as operators, the bid documents clarified that all four would use their own platform.

Together, these four operators hold 78% of the US sports betting market, including an 81% share in New Jersey.

However, the group said that in return it wished for this to be the only bid accepted, as it would fulfill the requirement for multiple platform providers and at least four operators.

Together, these four operators have proposed a 50% tax rate. It argued that only these operators would be large enough to make a 50% rate viable, thanks to their ability to reach customers.

“No other group of operators has the requisite scale and unique advantages to grow the  market at this tax rate,” it said. “A higher tax rate or accepting additional operators will inhibit the  market by creating economically unfeasible conditions.”

It said that it anticipated the state to make “nearly $600m” in gross gaming revenue in its first year of legal mobile betting, and more than $1.3bn by the end of the third year. This would easily eclipse current highs for any US state, set by New Jersey.

Taxed at 50%, this would mean tax receipts of more than $650m in year three.

The state will also receive $100 million in license fees in the first year.

In addition to the FanDuel-led bid, Flutter brand Fox Bet also submitted a bid of its own. However, much of this bid was redacted.

Kambi, meanwhile, submitted a bid as primary applicant that also lists Caesars, PointsBet, Wynn Interactive, Genting’s Resorts World brand and Rush Street Interactive. All of these except for Resorts World will act as platform provider. 

In addition, the Oneida Indian Nation and the St. Regis Mohawk Nation will also offer a betting skin of their own through this bid.

Kambi said that the connection to land-based betting brands would not only attract land-based casino customers to mobile betting, but also attract bettors to New York’s casinos. 

Another bid also includes Kambi as platform provider, while its operators comprise two sports-related brands with recent expansions into betting: Barstool Sports, which is partially owned by Penn National Gaming, and sportswear brand Fanatics. 

Much this Kambi bid was built on the argument that – given both brands have dedicated fanbases outside of the world of betting, or among customers who may currently bet offshore – it would be able to drive revenue without “cannibalizing” other bids.

As a result, it said that – over the course of ten years – the bid would be able to drive an additional $1bn of tax revenue on top of the revenue brought in by any other bids, though it did not mention the tax rate it would pay. This, it argued, would make it an ideal candidate in a system where multiple platform providers must be approved.

Fanatics would be a new entrant into the sports betting space. Among the personnel involved in its bid is rapper Jay-Z, who holds the record for the most number-one albums by a solo artist on the Billboard 200. Fanatics named Jay-Z as vice chairman.

Outside of music, Jay-Z has served in various business roles, including as president of Def Jam records.

The bid comes despite Barstool owner Penn National Gaming announcing its acquisition of theScore, with plans to ultimately migrate the Barstool brand away from Kambi’s platform to a new one built by theScore. While the bid referenced the acquisition, it did not mention what a possible migration may mean for New York mobile betting.

UK-based Bet365 is also among the operators, as a sole operator in its bid. Bet365 said it was “particularly optimized” for online betting, and particularly live betting. In addition, it said its lack of reliance on outside investment would allow it to be “in it for the long haul”.

It said that this approach meant it would not “bombard customers with untruthful advertising or deceptive promotions” but instead attempt a more “disciplined” approach to “avoid the missteps” that have occurred in other markets.

Finally, theScore submitted a bid, also as the only operator. TheScore, which is in the process of building its own platform, said it would be the platform provider and operator on the bid. It said in its bid that it would launch its player account management tools this month and its managed risk and trading services within twelve months.

The state will use a points system to judge the strength of applications. Licenses will be granted to the two highest-scoring bids, provided they both agree to pay the same tax rate. The Commission may also license additional bids if they are deemed strong enough.

The rate of taxation selected will be a major factor in how platform providers score points during proceedings, with incentives to offer more than 50% of revenue to the state.

Bids may also receive additional points if the parties involved have partnered with one of New York’s tribal operators. Besides the first Kambi bid, the bill led by FanDuel also has a partnership – with the Seneca Indian Tribe – while the second Kambi bid involving Barstool and Fanatics has a deal with the Saint Regis Mohawk Tribe.

Governor Andrew Cuomo signed off on New York’s budget in April, which allowed provisions for the legalization of sports betting within the state, but through a procurement process rather than open licensing.