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00:00Welcome back to Newswire here on SportsGrid.
00:06Very big news in the world of sports wagering where New York State, of course,
00:11when sports betting became legal, decided to have a tax rate,
00:15which some people felt was egregious, over 51%.
00:19Well, every other state wants to follow suit.
00:21So congrats to New York for setting the tone.
00:23Will it continue? Let's check in with Matthew Waters of Legal Sports Report.
00:27And Matt, this was a very big deal at the time.
00:29Several years ago, New York gets sports betting.
00:31All of a sudden, they're charging 51%.
00:33The sports betting operators say, whoa, whoa, this is too much.
00:36We can't handle it.
00:38Now every state is trying to follow suit.
00:39And what I would say is maybe other states don't get to that 51%,
00:44but we've definitely seen some hikes in tax rates across the country,
00:49I think, as a direct result as to what New York State was able to accomplish.
00:55Well, Craig, I think there's no doubt that when New York set the bar so high,
00:59you had some other states go back and say, wait, we could do that.
01:02You know, some of these states went lower than it was expected to.
01:07Some of the states went higher, right?
01:08Everybody thought Pennsylvania was egregious with its 36% tax and a $10 million license fee.
01:15And it turns out that that fit pretty well for that market, too.
01:18Everybody jumped into that market the same way that, you know,
01:22the operators were back and forth on this 51%, but at the end of the day,
01:25they still bid to get in the market because it's New York, right?
01:29And that was kind of the message that we heard at the National Council of Legislators
01:34from gaming states last week.
01:36This is a meeting where lawmakers can get together
01:42and hear what other lawmakers in other states have done
01:46and get an idea of what they should be doing in their state.
01:49And it's clear that, you know, New York took this 51% tax rate, but it's New York.
01:56That's why it was able to do that.
01:58Everybody, you want to be in New York.
02:00You think about how many people, one, live in the state,
02:03but then, two, travel in and out of the state.
02:05And it's just a customer acquisition must to be in New York
02:10if you're going to be a national company.
02:13But this 51%, the operators want to see it come down.
02:16And that's crazy, right?
02:19When have you known government to give back money, Craig?
02:23And that is what, as much as Troy Mackey,
02:27he's from the New York Assembly's Racing and Wagering Committee.
02:30He's the coordinator of that committee.
02:31And that's what he said.
02:32He said, quote, New York is doing extremely well.
02:35And it's one of those things that you cannot go back now, unfortunately, to reduce the tax rate.
02:40We tried to revisit that and there was no justification.
02:44Well, you couldn't justify taking away money from education
02:48and giving it to a corporation.
02:50That is the argument we've been up against.
02:51And, Craig, I think that should be the argument.
02:54They are up against these companies that run sports betting.
02:58They are businesses.
03:00They are trying to make money and that's great.
03:02But at the end of the day, when you say 51% of that money is going to the kids and education,
03:07going back on that is not what I would call politically a good idea.
03:12They've raised billions for education, Craig, and they can't stop now.
03:17They had tried to lower the tax rate by writing a bill to let more people come in.
03:24Mackey said that the original bill should have had more operators and it should have been taxed around 37%.
03:30That's where they thought the line should have been.
03:32And now we know that, of course, it's not.
03:35There's nine operators and 51%.
03:37And, Craig, they can complain about maybe offering worse odds,
03:43maybe doing this or that, not promoing as much, whatever.
03:46But they're going to be stuck with that 51%.
03:48So now, Craig, they're going to have to go, when it comes time for iGaming,
03:53they're going to have to fight for the tax rate there and try to get a little bit back
03:57because sports betting just isn't going to change at this point.
04:00Yeah, and what I found really amusing last year was when some of the sports betting operators said,
04:07oh, we may have to pull out of New York because of the tax rate being so high.
04:11Yeah, did that ever happen?
04:13No, and that never will happen again.
04:1649% of billions as opposed to 49% of millions on a granular level will tell you all you need to know
04:24about how many people are betting in New York.
04:25They're not going anywhere.
04:26All right, so as you mentioned, now this is where perhaps some money can be made
04:34for the operators to sort of deflect this 51% and that would be in iGaming.
04:39Now, how would this work as far as the revenue is concerned?
04:41Because naturally, more people are betting on iGaming and it's growing,
04:46but how would that exactly work in terms of benefiting that?
04:50Well, if you're talking about what the tax rate, Craig, iGaming is taxed differently
04:56in the seven or so jurisdictions that we have it in the U.S.
05:00Pennsylvania, for example, taxes it the same way that they tax the games at retail casinos.
05:06So the slots and tables, they pay the same rate.
05:09These operators have a chance with New York to try to get that down.
05:14And look, they came into this saying sports betting is low margin.
05:18iGaming is higher than that.
05:20We know that iGaming can make money.
05:22It's still not huge margins, but the amount of money that rolls into iGaming,
05:27the handle, the drop is much more than sports betting.
05:31So, you know, we're looking at iGaming and sports betting around the country
05:36and Chad Bainon of Macquarie actually just raised his expectations
05:40for what operators will report in the second quarter.
05:43And he thinks online revenue grew 34% in the second quarter.
05:48And that is updated from his model of 21%.
05:53You know, it was an interesting second quarter.
05:57Slower, of course, it always is.
06:00But we had some interesting battles in the NBA playoffs.
06:04And, you know, we have these other operators now, the ESPN bet, the Fanatics.
06:10We have Bet365 entering new states.
06:13And so we want to see the slower months still growing, right?
06:18We want to see the older states still doing their part and still adding more customers
06:25and seeing their customers betting more.
06:28At the same time, you want these operators to still be lowering their promotional spending
06:33and getting to that profitability line, right, Craig?
06:36And so Chad thinks that three sportsbooks are in good shape, DraftKings, FanDuel, and BetRivers.
06:44He thinks that they're set up nicely to outperform in the second quarter.
06:48And based on New York, right, you can look at those numbers and they report by operator.
06:52It gives you an idea of what the larger market overall might be looking like.
06:58Chad said that he's a little wary on what the hold could look like for BetMGM and Caesars.
07:05So, you know, right now we are still seeing growth in iGaming and sports betting.
07:13But obviously that growth could be a whole heck of a lot more for iGaming if more states jumped on.
07:18And New York is one of those states that people are looking at to possibly do it next year, correct?
07:24Yeah, again, big stories coming next year, I think, with iGaming and also the legalization of sports betting,
07:29maybe in a new state. We just haven't gotten a lot of that this year.
07:31All right, FanDuel, DraftKings, household names in sports betting.
07:36There are some others. Let's give BetMGM the credit.
07:39They may not be first or second, but they're, you know, right there, third, fourth, et cetera.
07:43New CEO Gavin Isaacs from Entain jumps on board.
07:47What does this mean for their company?
07:50Yeah, if you know Casino Gaming, Craig, then you know the name Gavin Isaacs.
07:55He's done some really big things in the industry. He's been with huge companies.
07:59He was the CEO of Scientific Games and then the chairman when they owned OpenBet.
08:04OpenBet is a huge sports betting supplier in the industry.
08:08After he left Scientific Games, he took chairman positions and board positions at some pretty important companies.
08:17Chairman at SB Tech, which is the platform tech provider that DraftKings bought.
08:22He was also on the DraftKings board, and he was an advisor to the board of JackPocket, which DraftKings just bought.
08:29So he's been in the industry. He's been cutting his teeth on sports betting.
08:34And look, Entain, they admitted last year that they were not fast enough to get U.S.-focused products to BetMGM to compete well enough with these big names.
08:45Gavin Isaacs is not going to let that happen.
08:47He's going to come in. He's going to right the ship of the tech side of BetMGM, and shareholders should definitely be excited about that.
08:56Yeah, would agree. Well, Matt, great stuff, great breakdown, and thanks again for coming on Newswire.
09:00We'll catch up again next week.
09:02Thanks, sir. Appreciate it.