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Erik Gibbs February 25, 2022 3 min read
New York Sports Betting Hits the Ground Running, but Revenue Elusive
New York has proven itself to be everything Senator Joseph Addabbo expected. He fought for years to bring sports betting to the state, knowing well in advance what it could mean to the state’s piggy bank. His insistence, and that of others, finally paid off. New York has the fastest-growing sports betting market in the US, but some analysts show they’re glass-half-empty thinkers.
New York Sports Betting Continues to Impress
Since its inception, online sports betting has set new records in New York. The state’s online market has now reached the $2-billion mark, surpassing all other states. Over the course of a little more than a month, New York’s online sportsbooks saw bettors wager more than $2 billion. This pace is expected to slow down now that the NFL has entered its offseason. However, this number bodes well long-term for the market.
The market was just short of reaching $2 billion within a 30-day period. It came close, posting a handle of more than $1.98 billion. Add a couple of more weeks, and the $2-billion barrier was broken.
By way of comparison, Tennessee has not yet posted even a full year with over $2 billion in wagers. New Jersey needed 10 months to reach that mark.
Analysts Show They Don’t Understand Economics
Despite the record numbers, New York’s sports betting operators are yet to make a profit. Over two million players have used their accounts since the frenzy began on January 8. However, one industry analyst had to point out that operators lost $200 million.
According to reports, the operators spent a lot on advertising which can cost between $100 and $150 per head. Caesars offered, for instance, a $300 signup bonus and a promotion in which the company would match deposits up to $3,000 with a maximum of $3,000.
New York’s high tax rate, which is 51% of gross revenue, has also contributed to the reported shortfall in sports betting.
DraftKings lost $50 million, according to an analyst. However, the CEO of the company said that it expects to be profitable in the next two to three years.
The analyst also suggested that Caesars had suffered losses. However, the stock rose in after-hours trading as a result of an announcement by the company that it would reduce promotional spending.
Launching a new business is never an easy – or inexpensive – task. The toughest times come in the first 18 months, most of which are seen during the initial launch phase. No business is profitable from the start, and it would have been impossible for operators to realize a profit in under a month.
However, while operators struggle to make a profit, New York’s legalization of sports gambling has been a huge success. The state has earned more than $80 million in tax dollars.