New York joined the ranks on legal sports betting in the United States at the beginning of 2022, and as expected, the rollout out was a rousing, ultra-lucrative success. After just a few short weeks, in fact, legal sports betting in New York has already become a billion-dollar business. And according to their current trajectory, it won't be long before it becomes a multi-billion-dollar business.
Indeed, the early returns out of The Big Apple are that successful. They recently released their total revenue from February, which marked the first full month in which legal sports betting was entirely operational. And while many projected a ton of business, very few foresaw this much money exchanging hands.
New York reported $1.54 billion in legal sports betting business for February 2022, a sum that shattered even the most optimistic predictions. That figure, which results in nearly $100 million in revenue when factoring in the money bettors won, has many wondering just how much more New York stands to make in the months and years to come.
Why New York Made So Much Money from Legal Sports Betting in February
Pretty much everyone knew that legal sports betting would pan out nicely in New York. They have one of the largest professional sports markets, and their residents were already uniquely engaged with the product, given their proximity to Atlantic.
Still, eclipsing the $1.5 billion mark in total bets placed during the first full month is quite the accomplishment. Initial projections didn't have them getting that high until the middle of the year, during the NBA playoffs and NHL playoffs. Some didn't think they'd hit the threshold until the start of the 2022 NFL season.
Instead, New York ended up getting an immediate boon from the Super Bowl matchup between the Los Angeles Rams and Cincinnati Bengals. Sports betting revenue was up in nearly every state relative to expectations, thanks in large part to a glamour market like Los Angeles not only hosting the big game but also sending a team to participate in it.
Not surprisingly, Fanduel led the way among licensed sportsbooks, taking in $568.3 million of the total betting revenue—more than one-third of the state's entire business. DraftKings checked in at second, with $390 million. Caesars ($328.4 million) and BetMGM ($154.4 million) also cracked nine figures.
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Impact of Billion-Dollar Sports Betting Revenue in New York
Experts in New York understand there won't always be this much money going through the sports-betting pipeline. Certain months without anchor events such as the Super Bowl will be slower. But this $1.54 billion figure also came early in the process. New York still has many unregistered clients it will eventually convert, which means it may not take long before the state's profit margin actually increases.
Given how well the first full month of sports betting went for the state, New York is reportedly already thinking about rolling back taxes for licensed sportsbooks.
At present, betting operators must currently pay a 51 percent tax—the highest in the country. It will decrease to 35 percent if the state increases its offerings to at least 14 licensed sportsbooks and could drop to 25 percent if that number reaches 15 betting operators.
While it's still early, expansion feels inevitable. It was always inevitable because sports betting was not going to succeed in New York. Now, it might just happen earlier, because of how much money everyone involved stands to make.
For the state, more licensed sportsbooks create more chances to generate revenue. They'll be getting a smaller tax rate (25 to 35 percent) from each operator, but there will be many more operators in total. And those sportsbooks will be more inclined to push their product since they won't have to give back more than half of their profit margin.
When will New York Expand Legal Sports Betting Market?
Everything discussed begs the question: When will New York expand their sports betting operation?
The answer isn't quite clear. Select experts see the state re-opening the licensing process in just a few short months. Others are more skeptical.
Currently licensed sportsbooks will have to agree to an increased pool of operators if it takes place during the first year. After all, they signed on thinking they were one of the seven primary licensed sportsbooks in New York. Drumming up the field of competition will cut into their raw sports betting revenue.
Still, that loss of overall business to inbound competitors can be offset by a drastically smaller tax rate—one that's anywhere between 16 and 26 percent cheaper than what they pay now. Also: Any new licenses handed out will be going to smaller sports-betting companies, as New York has already signed off on most of the biggest players. It will be the tinier operators who need to compete for extra business, not the more established and well-known places like DraftKings, FanDuel, Caesars, and BetMGM.
As for when sports betting expansion hits New York, and what it exactly looks like, we can't be sure. But the odds are good sports betting in New York will look much different by 2023.
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