When sports betting in New York was passed with a 51% tax rate, we knew it would lead to problems. Now, both DraftKings and FanDuel New York are saying they could abandon the market if that tax rate isn’t lowered to something more realistic.

The CEO of DraftKings, Jason Robins, described the situation as “unsustainable” while speaking at a recent joint legislative hearing. He pointed out that while the tax rate is already the highest in the nation, it’s even worse than it appears since fees and licensing make the state’s effective tax more than 70%.

The President of FanDuel, Christian Genetski, also chimed in on the problem, claiming that if the tax situation is not resolved, the state could see a drop in their handle of up to 20%. He added that lowering the tax in New York to something closer to the 36% in Pennsylvania would translate to greater long-term success.

Both DraftKings and FanDuel New York have taken the public position that leaving the tax rate where it is now will impact the market in different ways. Operators could consider marketing partnerships with sports teams and the leagues. Additionally, they could focus their marketing and promotions in more profitable markets.

Genetski pointed out that this was already happening with FanDuel, as the company has started to invest more on their marketing efforts on a per capita basis outside of New York. He also warned that the situation could lead to some smaller operators leaving the state altogether.

The politician who pushed the state to regulate sports betting was State Senator Joseph Addabbo. He chimed in on the matter by claiming that he cannot go to his constituency and say that he did something that reduced revenue and education funds.” That sounds somewhat amusing to us, as those funds have only been flowing for one year.

If the tax rate is not lowered, could we really see either DraftKings or FanDuel New York exit the market? Probably not, but other operators certainly could. That would mean less choice for consumers, and with that lowering of competition there would certainly be fewer promotions for players, and even worse betting odds.