New Mexico Online Sports Betting Proposal Faces Challenges

New Mexico Online Sports Betting Proposal Faces Challenges article feature image
Credit:

Robert Alexander/Getty Images. Pictured: The New Mexico State Capitol.

New Mexico’s casino stakeholders are pushing a major gaming expansion that would allow online casino gaming and sports betting. The proposal, as drafted, would make New Mexico the first western state with mobile casino gaming, but faces multiple political and logistical challenges before the legislation has even been introduced.

In addition to mobile and retail sports betting, the state’s five commercial, hybrid horse track–casino "racinos" are asking lawmakers to permit “Las Vegas-style compensation” such as lodging and food comps, allow alcohol to be served while patrons play games and reduce facility caps on slot machines.

Facing dwindling revenues and increasing layoffs, racino officials told the New Mexico Legislature’s Legislative Finance Committee these moves are essential if they are to remain viable in the wake of the COVID-19 pandemic.

If the “Gaming Recovery Act” passes, New Mexico would be the first state west of the Mississippi River to approve online casino gaming and just the fourth, after Iowa, Oregon, Colorado and Nevada, with mobile sports betting.

To do so would require not just legislative approval but a renegotiated compact with the state’s gaming tribes, a difficult process that faces headwinds even before the bill has been introduced.

Revenues Complicate Commercial Gaming Expansion

In exchange for expanded casino gaming, the tracks’ proposal would eliminate the revenue sharing taxes tribes are required to pay to the state. Tribes currently pay between 2% and 10% of annual adjusted gaming net win, depending on revenues, as part of a compact that was agreed to in 2015 and expires in 2037. The racinos, which can only offer slot machines, remit 26% of the net win.

Though the five racinos make more money on a per-property basis, the 24 tribal casinos generate more money for the state overall. In fiscal year 2019, tribal gaming contributed $78.4 million in taxes compared to $64.9 million for the tracks. The American Gaming Association estimates the tribes generate $1.84 billion in annual economic impact and sustain 15,000 jobs, compared to $357.7 million in economic impact and 2,300 jobs, respectively, for the racinos.

As proposed, state officials believe the lost tribal taxes wouldn’t offset the new racino gaming taxes.

“The draft proposal is likely to lower total state revenues,” state staff wrote in a memo to lawmakers. “The gain in taxes from expanded gaming for the five existing racetrack casinos is unlikely to exceed the nearly $80 million in annual tribal revenue sharing payments.”

Statewide mobile gaming could offset those declines.

In mature sports betting markets such as Pennsylvania and New Jersey, online sports betting makes up as much as 90% of total wagering handle. The handful of states with online casino gaming, undoubtedly bolstered by brick-and-mortar casino closures due to the COVID-19 pandemic, have also seen massive year-over-year revenue growth in 2020.

But online gaming opens another logistical challenge that could kill the racinos’ proposal.

Tribes Play Crucial Role

Permitting statewide online gaming is politically more challenging than allowing more slot machines on a casino floor, especially in a state which already has an explicit online gambling ban on its books. In addition to the headwinds facing a bill that could reduce revenues in a state already facing a massive budget shortfall, any racino gaming expansion would require tribal consent.

After years of negotiations, New Mexico’s leading gaming tribes reached a landmark deal in 2015 that gives them tax and gaming advantages over the rival horse tracks, one they seem disinclined to tear up without major concessions.

On top of the exclusive rights to offer table games such as blackjack, the wide-ranging deal indirectly granted them the right to allow sports betting at their casinos. New Mexico is the only state to open a sportsbook without an act of the legislature after the Supreme Court struck down the federal wagering ban in May 2018.

Though mobile sports betting generates more overall revenues, most Native American tribes have viewed sportsbooks as a way to attract customers to their properties.  In most states with tribal gaming, on-reservation casinos can be one of – if not the largest – revenue generator and employer for a community, especially among smaller tribes. For many, the goal is to assure money comes into their casino, not necessarily what will generate the most in state tax revenues.

Even if lawmakers pass a bill that permits statewide mobile casino gaming and sports betting, they would still need consent from the tribes to overrule a compact. Though it means lower taxes, Native American groups seem unlikely to make a deal that could possibly reduce tribal casino foot traffic while increasing racino and online gaming patronage.

New Mexico could introduce one of the most expansive gaming bills of any state when lawmakers return for the 2021 session next January, but the financial, political and logistical hurdles ahead of it make passage a difficult endeavor.

How would you rate this article?

This site contains commercial content. We may be compensated for the links provided on this page. The content on this page is for informational purposes only. Action Network makes no representation or warranty as to the accuracy of the information given or the outcome of any game or event.