New York Online Sports Betting: What Stands in the Way of Legalization

New York Online Sports Betting: What Stands in the Way of Legalization article feature image

Mark Lennihan-Pool/Getty Images. Pictured: New York Gov. Andrew Cuomo.

For the first time ever, both the New York State Senate and Assembly passed online sports betting provisions in their fiscal year budgets, bringing statewide mobile wagering closer than ever to what would be the nation’s largest legal market.

Now, the real work begins.

Lawmakers from both chambers have two weeks to hammer out differences on sports betting, casino licensing and horse track funding, among other gaming-related discrepancies between the Senate and Assembly budget proposals, which are just minor parts of the state’s projected $200 billion fiscal year 2022 budget.

The two chambers’ mobile sports betting provisions are largely aligned, boosting hopes online wagering is included ahead of the April 1 budget deadline. The larger issue remains between lawmakers’ preferred multi-operator model and Gov. Andrew Cuomo’s single or limited-operator proposal.

This sets up a frantic fortnight for the Assembly, Senate and governor’s office to all agree on the nation’s largest state budget.

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Differences Between Proposals

The Senate’s budget bill awards three downstate casino licenses that were originally not scheduled until 2023. This could open hundreds of millions in new licensing fees and gaming revenues, as well as new sportsbook partners, for the upcoming fiscal year budget.

Doing so may be politically difficult. The delayed licensing was ostensibly to help four upstate casinos compete with the more populated downstate region and lawmakers may not support losing those revenues in their districts.

Otherwise, the only gaming concerns voiced during hours of budget debate ahead of Monday’s vote regarded fund allocation for certain pari-mutuel horse tracks. Several lawmakers objected to a few million dollars in budget cuts, a relatively minor issue in the $200 billion budget.

The biggest discrepancy remains between legislators’ sports betting proposal and the governor’s.

Cuomo announced his preferred single-operator, lottery-run sportsbook model in January, contrasting his fellow Democrats’ multi-operator model. Follow-up press statements mentioned “one or more” operators but still contrasted the competitive market sought by lawmakers, sportsbooks and the industry at large.

Cuomo’s administration has offered few details since the initial announcement. In the meantime, lawmakers have advanced the multi-operator market now included in the Senate and Assembly budgets.

Lawmakers United Behind Competitive Market

Both chambers’ budgets call for as many as 14 online licenses, two each to the four upstate casinos and three Native American gaming tribes. The four commercial casino sportsbook partners (FanDuel, DraftKings, BetRivers and bet365) would be eligible for online licensees. William Hill, the Stars Group, Kambi, Penn National and Gold Nugget all have market access in place should the budget legislation pass.

Online sportsbooks would be taxed at 12% gross gaming revenue, slightly above the national median average. The $12 million licensing fee is among the nation’s highest, but neither the tax nor the licensing fees seem like New York market entry deterrents.

The bill also allows retail options at certain off-track betting facilities, horse tracks and professional sports stadiums. Online wagering would still project as the largest handle source; more than 80% of betting handle in neighboring markets such as New Jersey and Pennsylvania comes online.

Notably, the bicameral support comes exactly a year after only the Senate included the sports betting language in its budget; the Assembly, largely because of Cuomo’s mobile wagering opposition, did not, effectively killing mobile wagering hopes in 2020.

Cuomo hasn’t further detailed his 2021 sports betting framework, but it appears the four casino sportsbook partners would bid for one or a limited number of licenses. The governor’s administration hasn’t announced preferred tax rates, licensing fees or other key criteria.

Revenues Could Bridge Differences

With lawmakers unified behind a mobile betting framework, Industry stakeholders believe revenue generation could be the best way to bridge the divide between their plan and the governor’s.

Cuomo argued his single-operator model would generate $500 million in annual revenues at maturity, assuming the lone sportsbook accepts a massive tax on earnings. Industry observers believe a de facto monopoly could generate more direct government revenue, but it eliminates all other sportsbooks' licensing fees and limits the potential to capture black-market customers.

The legislature’s multi-operator backers must now convince Cuomo that their plan could come near his projections. That could mean a higher tax rate, higher licensing fees, increased skin count, new operator partner eligibility or a host of other moves that could be considered during the next two weeks’ budget deliberations.

New York’s massive market potential gives Empire State policymakers a major advantage. Sportsbooks would readily accept taxes and fees above or near the current all-time high in exchange for access to New York’s 20 million residents.

Next Steps

A conference committee of Assembly members and Senators will now rectify gaming, and many other policy differences, between the two chambers’ budgets. Even $500 million is a minuscule part of the $200 budget, which could allow lawmakers preferred regulatory structure to advance through Cuomo’s possible objections.

Industry observers will also watch how Cuomo handles this year’s budget in a politically weakened state. Dozens of federal and state-level New York Democrats have called for his resignation as officials investigate his handling of COVID-19-related nursing home deaths as well as sexual misconduct, which could force Cuomo to fight more financially and politically consequential legislative battles.

The end result for sports betting — and the budget at large — rests with a handful of elected officials in Albany. The next two weeks will clarify how or if mobile wagering begins in New York.

Until then, sportsbooks, sports bettors and the gaming industry at large will have to wait on what would be the nation’s largest legal wagering market.

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