New York Sports Betting Study Shows Massive Potential For a Competitive Market

A long-awaited New York gaming study says the state could bring in nearly $100 million in annual online sports betting tax revenue — assuming it doesn’t follow Gov. Andrew Cuomo’s proposal.

The study from Spectrum Gaming estimated the state’s four commercial casinos and three Native American gaming tribes could take in more than $1 billion in online sports betting bets, which would lead to roughly $100 million in taxes for the state government.

The study assumes at least seven statewide online licenses, or “skins,” between the gaming entities and didn’t consider a sole-source operator, a model supported by Cuomo.

The governor initially stated he wanted a lottery-run, lone operator model before ensuing press statements and his initial budget proposal opened up the potential for an unspecified number of additional sportsbooks. Cuomo said this model would generate $500 million in annual taxes.

De facto sports betting monopolies have been largely decried by industry stakeholders, specifically struggling lottery-run markets such as Oregon and Washington D.C. Industry observers argue a competitive marketplace with as many top operators as possible is the most economically viable and the only way to capture legal bettors away from the black market.

Gaming experts also note that sportsbook licensing fees and renewals are a massive part of a state’s revenues for sports betting, which is a comparatively low-margin offering for gaming providers. New York would potentially lose hundreds of millions of dollars in these fees if it severely restricts eligible operators.

Downsides to Cuomo’s Proposal

Many top brands would be shut out under Cuomo’s proposal, which calls for the mobile sports betting license or licenses to be bid between the four commercial casinos’ retail partners. That would leave at most four legal sportsbooks to choose from, which currently includes DraftKings, FanDuel, BetRivers and Bet365.

The Oneida, partnered with Caesars William Hill, Mohawk (Stars Group – FOX Bet) and Seneca (Kambi) tribes would be left out under Cuomo’s proposal. So, too, would potential horse track-affiliated sportsbooks such as BetMGM at MGM-owned Yonkers Raceway.

Other leading operators that have publicly expressed interest in New York online sports betting such as Penn National’s Barstool Sportsbook would also be shut out.

Cuomo’s plans contrast a multi-operator model under consideration in the legislature and championed by lawmakers in his own party. The latest online sports betting legalization bill would allow each of the seven aforementioned gaming interests two skins apiece, allowing as many as 14 brands to enter the state.

The New York lawmakers’ plan is more similar to the model of neighboring New Jersey, albeit with roughly half the skin count.

The Garden State has become the single largest sports betting market by handle, of which 20 percent — by Cuomo’s own estimate — comes from New Yorkers. Cuomo dismissed the New Jersey model, saying at a press conference earlier this month it makes money for casinos, not the state.

Next Steps for New York Online Sports Betting

At this point, it appears the study, which was originally supposed to be released in 2019, will have little impact on Cuomo’s position. That means the contrasting visions between a multi-operator and single or limited-operator model are still set to collide.

Though Cuomo doubled down on his vision for legal mobile wagering in last week’s budget proposal, formal legislation to do so has not yet been introduced in the legislature. Meanwhile, the multi-operator proposal has advanced out of both the Assembly and Senate’s respective gaming committees.

Unlike other aspects of sports betting legislation such as tax rates or licensing fees, model structure can not be compromised. Cuomo and most fellow Democrats in the overwhelmingly Democratic state legislature support sports betting, but to legalize it requires either a competitive market or a limited one.

In absence of one side getting its way over the other, New York mobile sports betting — and what would likely be the nation’s most lucrative market — remains nonexistent.