Exclusive: US tax hikes are not in the interest of customers, insists BetMGM CRO
Matt Prevost urges regulators to strike a better balance as “prohibitively expensive” tax rates will only play into the hands of black-market bookmakers and sweepstakes operators
BetMGM chief revenue officer (CRO) Matt Prevost has argued that aggressive tax rises on the regulated US industry will likely drive customers towards the black market.
Speaking to EGR on the side lines of ICE in Barcelona, Prevost said increases only benefit unlicensed operators in the long run and that the legal firms needed to work with lawmakers to create a “sustainable business model”.
Earlier this week, Democrat Senator John Keenan proposed a new sports betting bill for Massachusetts to raise the state’s sports betting tax rate from 20% to 51% – a move that would put the Bay State on a par with New York.
Furthermore, Maryland governor Wes Moore has proposed to double the state’s sports betting tax rate to 30%, while a bill has been tabled in Indiana to raise its rate from 9.5% to 11%.
Prevost said: “Over the last five years, we were focused on growth and launching in new states, [but] as our business and the industry has become mature, we’re increasingly tailoring the offering, and the level of promotional intensity, to individual states based on economics.
“The challenge we all face as an industry is where we have tax that is prohibitively expensive, we find ourselves increasingly in a situation where the offshore, illegal, unregulated market becomes more and more attractive to customers.
“We’re looking to strike a balance with our regulators to form something that’s a sustainable business model for all those involved.”
Prevost added lawmakers need to put safe play at the forefront of their minds when considering raising taxes, adding that some states aren’t acting in the interests of consumers.
“By making the illegal offshore market a more attractive option, you have these sweepstake options and other business models that frankly don’t have any player protection,” the CRO added.
“They don’t have any investments in responsible gaming, they don’t have any type of self-exclusion or other really positive aspects where the regulator plays a role.
“If you put player interests first, you tend to end up in a logical place where all sides are comfortable and supportive of the industry – that’s the type of partnership we have in some states.”
Earlier this month, Rush Street Interactive CEO Richard Schwartz spoke out against tax hikes, claiming they don’t work as a “quick-fix solution” for addressing budget gaps and funding issues.
As well as pointing to evidence of channelisation falling in Europe due to increased tax burdens on operators, he called for states to legalise online gaming as a better way to generate tax dollars.
Nevertheless, this issue has been a common theme of late; in 2023, Ohio doubled its rate to 20%, while lawmakers in Illinois rolled out a controversial graduated system last July, with the operators generating the highest gross revenue, namely FanDuel and DraftKings, paying 40%.
While the national average is around 20%, other states with open markets, like Vermont and Pennsylvania, also have particularly hefty tax rates of 31% and 36%, respectively.
DraftKings has looked to offset the 51% tax it pays in New York by introducing a $20-a-month subscription service on parlays and same game parlays (SGPs), a move approved by the New York State Gaming Commission.