NY Residents Can Kiss Their Rebates Goodbye Comes The New Year
 

It looks like the bill proposed early in the year has been finalized and will go into effect comes Jan. 1st.

With the 5% toll on all wagers made, there's no way the ADWs that have been paying us generous rebates can continue to do so.

Now what?

http://www.drf.com/news/new-york-add...tate-companies

So, i read this and still don't understand it....does it only hurt NY residents, or everyone?

All NY Residents that place wagers through an ADW that is not formed and organized in the state New York. This includes twinspires, TVG, expressbet, drfbets, amwager, darkhorsebet, etc. Pretty much all the sites you can wager from with the exception of those operated by New York racetracks.


Here's another article from one of the wagering sites listed above:

DO YOU LIVE IN NEW YORK?
If the answer is yes, this is an important announcement for you. A law set to go into effect Jan. 1 in New York will require out-of-state account-wagering operators to pay a 5-cent fee for every dollar wagered through their operations by a New York resident. The law calls the 5 percent fee a “market-origin fee,” and it will be applied to any wager made by a New York customer, regardless of whether the customer is betting on a race at a New York track or an out-of-state track.
Sadly, this hurts you, the player, and it hurts horseracing overall. At DHB, we have tried to give back as much in rewards as possible, but this new legislation will force us to lower the rewards structure on our players with NY addresses.

Thanks. I got it now. They're just trying to bilk anyone who won't bet with them and force them to sign up with their own bet takers....sort of like NJ has done.

Even though this doesnt hurt me, i think i'm going to just stop betting their races. (not that i ever pick a winner there anyway)

I think rather than go through the expense of collecting the tax from their bettors in NY, the ADW's will simply refuse business from NY based accounts.
This is the same thing as a state demanding merchants in another state collect sales taxes from a resident of that state.
The Massachusetts government tried this. That state's government determined that MA residents were crossing into Maine and NH where taxes on liquor by the bottle are much lower. MA demanded merchants of those states identify MA residents and tax them at the MA rate, then collect the tax and pay it the MA government..ME and NH told MA to go jump into Boston Harbor.
Is it conceivable that ADW's refuse to collect the tax?
I view this as another desperate money hungry over spending state committing a money grab.
Like any other 'sin tax', this sort of taxation usually results in loss of revenue.

While it will not help the average player, I wonder if those using Schedule C to report their wagering activity can recoup a portion of the lost rebates (perhaps up to 45%-50%) by listing the 5% fees as "expenses" among their other racing business expenses to offset reportable income?

It certainly is an expense when a POS government imposes it.
NY has a lot of cold weather, so the thieves that run the state do this so they don't have wear a mask and wait in dark alleys to rob us. :ThmbDown: :ThmbDown: :ThmbDown:

Seems to be a conflict of interest seeing how Baby Mario has an interest in NYRA tracks.

where, i don't know, but you're probably going to have to move. :mad:

pennsylvania just got hit with a similar fee of 10% which killed the rebates. :mad:

of course i counted attendance this afternoon at penn national of 11 in the simulcast theater and 16 in the clubhouse. in a real racing state like new york.... this could spell disaster not for their own handle, but for ny handle coming in on non ny tracks.... like (oh, the irony) penn national. :rolleyes:

Good point. And where do you think the majority of handle is wagered from on Mondays and Tuesdays at tracks like Parx, Beulah Park and Zia?

They do better business on these days than on their weekends

This is very confusing to me. This is from the article.

Account-wagering companies typically retain 10 to 20 cents per dollar wagered.

I don't understand how everyone gets their piece of the pie. When I wager $50 through Twinspires isn't that money put in the pool where I wagered? Then there is the track take depending on the wager. I thought money got distributed to everyone else (outside of the bettors) from that.

Can someone do a simple breakdown of the flow of a wagered dollar from me making a bet, going to ADW, going to track etc. and where everything gets siphoned off including rebates and how that money fits into the picture. I don't consider myself a newbie but it has always seemed like there is more more money taken out (I don't mean take out) than goes in and I've always found it a bit confusing. I am confused asking the question!

Thanks.

The problem I see with this is that the fee is being being paid by the operator, not the bettor.

The article below should help, now after reading this, the ADWs are going to be charged an additional 5% come January from New York residents. It's going to be like somebody that commented earlier, the ADWs are going to drop us, it's makes no business purpose to keep have us as customers if they are not going to profit from us.




ADW by the Numbers: How an ADW Operates

Posted on March 1, 2013 by Eric Troelstra
It can be argued that ADWs (Advance Deposit Wagering) have become to horse racing wagering what E*Trade has become to online stock trading. The ADW has brought the technology and the convenience of wagering on pari-mutuel horse racing to the desktop, laptop and mobile device of everyone that enjoys the game. Not only can you wager, but many ADWs offer you live video streaming, video replays as well as current odds, instant results, analysis, industry news, and player reward programs.

HOW DOES AN ADW MAKE MONEY?
So how does an ADW get compensated or make money for their offerings? There are several components that contribute to the bottom line of an ADW. ADWs negotiate with racetracks around the globe for the permission to offer the product on their ADW platform. In return, ADWs pay the track a negotiated “host fee” for the rights to carry the track signal. These fees can vary dramatically from track to track.

The next major cost component affecting the bottom line of an ADW is the “take out” on each pari-mutuel pool. The take out can be thought of as the tracks commission, or “rake,” if you were to think of it in poker terms. Take-out is set by the tracks and again varies widely by track and pool type. The difference between the take out and the host fee is the gross margin or contribution margin the ADW uses to cover all General and Administrative (G&A) fees, taxes and player rewards.

Let’s take a look at what this may look like in a potential real world example.

NUMBERS BREAKDOWN
Let’s assume the “take out” = 20% in an Exacta Pool at XYZ track. XYZ track charges ABC ADW 8% “host fee” on all volume (handle) that the ADW places through XYZ track. Simple math leaves 12% (20% – 8%) on every dollar wagered through ABC ADW on XYZ track for the ADW to cover all expenses and hopefully make a profit.

Typical racing commission fees, tote fees, interface fees, taxes etc. could range in the neighborhood of 1.5% of handle. General and Administrative (G&A) fees are all of the salaries and benefits, marketing, rent/mortgage, utilities, insurances, legal and professional – you get the idea – all the typical day-to-day operational expenses most businesses incur. Typical G&A could run around 3% of handle.

Now let’s assume XYZ ADW is very player and industry friendly and offers a 5% cash reward on all exacta wagers made at XYZ track. In our example, this leaves the XYZ ADW a 2.5% EBITDA (earnings before interest, taxes, depreciation and amortization).

XYZ Track Take Out on Exact Pool 20%
XYZ Host Fee to ABC ADW - 8%
Gross Margin 12%
Fees and Taxes -1.5%
General & Administrative (G&A) - 3%
Player Rewards - 5%
Earnings (EBITDA) 2.5%

As this illustration points out, ADWs operate on margins similar to that of online stock trading services. Like E*Trade, success is hinged on generating volume while offering its clients service, convenience and ultimately the best overall value.

thanks for the post
it also begs the question is the gambling on horseraces a viable means to invest for new yorkers.
for me personally with this new law the idea of making any significant money in horse betting has gone the way of the dodo bird,as i am a resident of new york and my company has no operations outside of new york to a bettor friendly state.
i guess it's time to devote less time to gambling on horses and more time on my other pastimes such as astronomy, and stamp collecting of rarities.
it has been a precipitous decline in a very short time anyway. first, the rapidly dwindling opportunites due to short fields in horse races, the increased efficientcy of the parimutuel market, and the exodus of casual bettors from the betting pools, now the elimination of my rebates come january.
keep up the good work nyra, cuomo and company.

infrontby1 Thanks for that post. First time I saw some sort of real breakdown.

truly a great comparison. the only bonus an adw gets is the breakage.

when a stock trader places his trade on E-Trade, his order goes in and either gets filled to a market order or a limit order. the clearing house gets filled filled at the very best possible price often times getting the fill 1/2 cent better than the customer. if a customer has an order for 10,000 shares of an equity, the brokerage firm makes the an added $50 over and above the commission.