BetMGM has called New York’s tax rate “irrational” and will be limiting its presence in the Empire State as a result.
Updating investors, BetMGM reported that it expects its net revenues for 2022 to hit $1.3bn, with a positive EBITDA anticipated in 2023.
The operator also reiterated its ambitions for the US, stating that it predicts to achieve a market share of approximately 20-25%, with expectations for its EBITDA margin to fall in the range of 30-35%.
Speaking during BetMGM’s business update, Chief Financial Officer Gary Deutsch reflected on the $1.3bn revenue expected for this year, and highlighted the issues the operator has had in the Empire State since the launch of its online sports betting market earlier this year.
The CFO noted that during Q1, BetMGM decided to pull back in its pursuit of players in New York due to its ‘unfavorable tax environment’, directing its marketing budget from New York to states with better economic returns.
Deutsch stated: “The specific problem in New York is that it has a high tax rate of 51% on gaming revenue and it applies that rate to both real revenue and phantom revenue associated with non-cash promotional wagering.
“Even at lower-than-typical promotion levels for a new market, operators in New York stand to experience effective tax rates (taxes divided by real revenue/GGR) of well over 100%.”
Data from the New York Gaming Commission shows that BetMGM achieved a $142.2m handle in April, with a $5m GGR. With the Empire State’s 51% tax rate, $2.54m of the operator’s revenue went to state coffers.
Since New York launched its online sports betting market in January, the operator has recorded $551.7m in wagers, $17.4m in GGR, and $8.88m in state taxes.
Deutsch further explained that BetMGM is prepared to have a bigger presence in New York in the future, but only if the tax conditions are revised.
The CFO said: “We have hope that the New York tax environment will be updated, and we can then again more aggressively pursue New York players.
“However, as rational allocators of capital, with sophisticated investors in Entain and MGM, we simply can’t apply our capital against an irrational investment thesis.
“Players will never continue to play if the house always wins, and the house cannot continue to play if it’s always going to lose.”
