Breaking: New York Online Sports Betting Is Approved With Gov. Cuomo’s Limited-Operator Model
Photo credit: Albin Lohr-Jones/Pool via Bloomberg
New York will approve a limited-operator, government-bid online sports betting model that was backed by Gov. Andrew Cuomo and opposed by most state lawmakers and the gaming industry at large.
Under the plan, which will be passed as part of the state's $200 billion fiscal year 2022 budget, the New York Lottery would issue requests for proposals from two mobile betting operators, which would then subcontract out licenses (or "skins") to four sportsbook operators.
Many key details of that specific structure were not revealed publicly at the time of publication.
"When the budget ends, that's when the work starts," state Sen. Joseph Addabbo told The Action Network Tuesday. Senate Finance Chair Liz Krueger said on the chamber floor Tuesday she expects a completed budget vote by as early as this evening.
Addabbo said the New York Gaming Commission would work on further regulatory follow-up measures. Officials are hoping to launch online sports betting by September, ahead of the 2021 football season.
New York retail sports betting opened their doors in June 2019, generating a few million dollars in total combined betting handle since their initial wager. Online wagering is expected to make up more than 90 percent of New York's betting handle, which industry observers believe could eventually top billions of dollars in gross handle monthly.
Possible Impacts on Top Sportsbooks
This model appears to particularly benefit the four existing upstate casino sportsbook partners: DraftKings, FanDuel, BetRivers and bet365, all of which could bid for one of a limited number of licenses. It was unclear if "second-skin" partners such as Penn National's Barstool Sports and PointsBet were eligible to bid for a license.
Other gaming entities such as MGM's Yonkers Casino and Resorts World at Aqueduct Racetrack racinos would apparently be excluded from bidding. Both entities had hoped to be granted full-fledged casinos licenses that would allow them to open retail and online sportsbooks such as BetMGM, but those licenses were reportedly excluded from the budget process.
Cuomo promised during a Monday press conference that the state's three gaming tribes would also be included in NY online sports betting, but details were not revealed at publication. The Oneida Nation (which already had a preemptive deal with Caesars/William Hill), Akwesasne Mohawk (FOX Bet) and Seneca tribes pushed for legal sports betting options during budget deliberations, but could be excluded from statewide mobile wagering.
The budget legislation will also reportedly exclude in-stadium betting kiosks at Yankee Stadium, Madison Square Garden and other major New York sports venues lawmakers had supported.
Tuesday's announcement was a blow to Democratic lawmakers who had pushed a competitive model and most industry observers and stakeholders. Despite political scandals and possible investigations, Cuomo's preferred model won out, and appears set to usher in the largest legal sports betting market by population despite industry stakeholder opposition.
Addabbo said New York's online sports betting model could change in early 2022 if it doesn't meet expectations, though any details are speculative at this point.
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Background
Cuomo dismissed online sports betting in the years after the Supreme Court struck down the federal wagering ban and allowed states to legalize retail and mobile betting, calling it a “rounding error” that was also subject to a voter referendum and not worth the hassle. In January 2021, facing a $15 billion budget shortfall, Cuomo’s tune changed.
Cuomo shook up the sports betting world at a January press conference when he embraced statewide mobile wagering as one solution to the massive budget shortfall. Hours later, he upended the nation’s largest potential legal betting market again with his single-operator solution.
Later extended to “one or more” operators, Cuomo stuck by his limited-operator model, which called for the four upstate commercial casinos to bid for the licenses and pay high tax rates in exchange for a de facto monopoly or oligopoly. Cuomo said this model, with fewer operators but higher taxes, would generate $500 million in annual revenue for the state, more than the multi-operator model preferred by lawmakers and the gaming industry at large.
This started a months-long stalemate between the governor and legislators of his own party. Lawmakers’ plans called for 14 online licenses or “skins,” two apiece to the four casinos and three New York gaming tribes. The proposed $12 million initial licensing fees for all 14 skins would generate instant revenue, advocates argued, and the competitive model would allow New York to capture a larger share of the offshore market.
The 14 skins also would keep New Yorkers from traveling to New Jersey to place sports bets with their preferred operator, advocates said. By Cuomo’s own estimate, 20 percent of New Jersey’s nearly $1 billion in monthly handle comes from New York.
Neither side would budge from their incompatible models for months.
Lawmakers pushed the multi-operator plan forward, including it in both the Assembly and Senate budget proposals for the first time in state history. Cuomo reportedly wouldn’t back down despite overwhelming bipartisan competitive-model support in the legislature and nearly unilateral backing from the state and nation’s gaming stakeholders.
Now lawmakers that had opposed Cuomo's plan hope the limited model can still reach the governor's lofty projections.
“We hope everyone in our state who has been spending money in New Jersey or Pennsylvania or perhaps illegally will try us and stay with us," Addabbo said.
What Comes Next
The deal leaves many questioned unanswered.
It wasn't clear Tuesday how many (or which types) of sportsbook companies or gaming entities would be eligible to bid. It appears New York would create a "New Hampshire" model, which allows certain operators to take a larger market share in exchange for higher tax rates, but it remains to be seen how this would practically come into effect if four skins are guaranteed.
Tribal exclusion could create another issue. The Oneida tribe threatened to suspend casino slot payments if excluded from online sports betting, and Tuesday's budget vote didn't reveal how they would be included.
The plan reportedly places servers in retail casinos to meet the state's constitutional gaming requirements, but the practical implementation could still be an issue. Would a sportsbook operator without a brick-and-mortar New York casino be able to bid?
These are among many key issues that must be resolved in the coming days and weeks. New York has crossed the key threshold for legal sports betting, but critically important details covering nearly every aspect of the nascent market were not clear Tuesday.
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