If mobile sports betting (placing wagers through electronic devices) comes to New York, Gov. Andrew Cuomo wants it to be run like the state Lottery.
That means it would be operated by the state, or at least by a single vendor chosen by the state, not by competitive businesses.
And that, many advocates of mobile sports betting say, could be a mistake. And it could set up a showdown with state lawmakers, who are currently considering bills that envision a competitive, multi-vendor model.
Is there a difference?
“It’s early days, but the data we have is that the lottery/monopoly model underperforms (in revenues) compared to competitive markets,” said Chris Grove, managing director of Eilers & Krejcik Gaming, a national research firm specializing in the gambling industry. “It’s behind in revenue and handle (the amount of money wagered.)”
Yet Cuomo has decided to embrace mobile betting precisely because he sees it as a revenue generator for the state.
“The question isn’t whether or not we do mobile sports betting,” Cuomo said in releasing details of his 2021-22 state budget proposal this week. “The question is more how and who makes the profit. This is very lucrative.”
Cuomo’s team estimates mobile sports bets could generate $500 million in annual revenues, and he believes state control would ensure that more of that money goes to the state, which is currently facing a $15 billion deficit.
“I believe the people of the state should get the revenues,” Cuomo said. “This is not a moneymaker for private interests to collect just more tax revenue. We want the actual revenue from the sports betting.”
Cuomo’s support for some form of mobile sports betting represents a change from past years, when he argued that online wagering would require an amendment to the state Constitution.
Cuomo did sign a law in 2019 that established sports betting in New York, but only for wagers placed at the physical premises of the state’s four licensed Upstate casinos. (That also opened the door for physical sports books operated by the state’s Native American nations).
While gaming proponents welcomed Cuomo’s change of heart on mobile bets, they question his support for a state-run model.
“I think we all agree we need to maximize the income for the state, and at the same time stabilize the economic situation at the state’s casinos,” said Jeff Gural, who owns Tioga Downs near Binghamton, one of the four commercial casinos where sports betting is legal. “But I think the competitive market is the best way to maximize the revenues we can raise. I don’t think the lottery model would work.”
Gural believes there’s still time to convince Cuomo to go with the competitive model. The new state budget must be adopted by April 1.
“I think we can discuss this with the governor and make the argument that competition helps everyone,” said Gural, who also owns Vernon Downs racetrack/casino in Oneida County, which has horse betting but not other sport betting. “That way we can all have success together.”
Meanwhile, bills introduced in the state Assembly and in the Senate this year call for competition. Those bills envision up to 14 sports betting app vendors — two at each of the four commercial casinos and two for each of the three Indian nations that operate sportsbooks.
“I look forward to working with the Governor and his office to efficiently implement mobile sports betting for the people of New York,” said Sen. Jospeh P. Addabbo, the Queens Democrat who chairs the Senate’s gaming committee and sponsored its bill. He has been pressing Cuomo to support online wagering for several years.
He said the multi-vendor approach, would could be expanded to include stadiums, arenas and other vendors, “is a far better product” that could lead to more revenues and more jobs in the gaming industry.
Assemblyman Jeff Gallahan, a newly elected Republican whose Finger Lakes district includes the del Lago Resort & Casino near Waterloo, said he (and the casino’s operators) prefer the competitive model, according to a report at legalsportsreport.com.
“They (del Lago) are ecstatic this bill has been put forward because it’s much better than what they saw from the governor and I couldn’t agree more,” Gallahan said.
In the current sports betting model in New York, each of the four commercial casinos has partnered with a different private vendor to run its sports book. Tioga Downs is partnered with fantasy sports operator FanDuel, while de Lago uses another fantasy sports company, DraftKings. Resorts World Catskills near Monticello in Sullivan County partners with bet365, while Rivers Casino & Resort in downtown Schenectady uses its in-house firm Rush Street Gaming.
Sports betting is also available at the three Oneida Indian Nation casinos in Central New York, where the partner is Caesar’s Entertainment. The three casinos operated by Seneca Nation of Indians in Western New York and the Akwesasne Mohawk Casino near Hogansburg in Northern New York also host physical sportbooks.
The Oneidas have expressed concern about legalizing mobile sports betting. The compacts the Indian nations operate under guarantee them “exclusivity” in gaming in certain geographic areas of the state, which could be compromised by online bets, they say. However, the compacts also allow the tribal casinos to operate any form of gaming allowed at the commercial (non-tribal) casinos.
Different states use different models for online betting, said Grove of Eilers & Kejcik Gaming. Smaller states, like New Hampshire and Rhode Island, tend to use the single vendor/monopoly model, while large states have competitive sites.
New York’s neighbor New Jersey, which has become one of the biggest sportsbook markets in the country, has at least 19 different online sportsbooks, according to playny.com. It has been setting records for revenues and taxes with its sports betting operations, with much of the “handle” coming from mobile betting.
In New Hampshire, which legalized mobile sports wagers last year, DraftKings won the monopoly to operate the online betting. It pays the state 51% of it revenues.
The issue of revenues has “a lot of moving parts,” Grove said. A small state, for example, may have a lower amount of wagers (or handle) but could attempt to make up for that with a higher tax rate, he said. A larger state may be able to set a lower tax rate but make up for it with higher handle.
New Jersey had $6 billion in total sports betting handle in 2020, but many observers argue much of that comes from New Yorkers. An analysis at legalsportsreport.com estimates New York would need to generate $20 billion in annual handle to meet Cuomo’s expectation of $500 million in revenues for the state.
In addition to the tax revenues states can claim on wagers, the other big revenue generator is the sale of licenses, Grove said. A large state like New York could get as much as $30 million per license, he said.
The bills currently in the New York state Legislature envision a $12 million license fee and a 12% tax rate on mobile sports bets (compared to 8.5% for bets at the casinos).
And another issue is making sure that whatever legal sports betting system the state adopts is attractive enough to “siphon” off the existing illegal market, Grove said.
“This is all new revenue for the state,” he said. “The question is how to do it in a way that optimizes and maximizes the value for the state.”
More coverage of casinos and gaming in New York
Don Cazentre writes about Upstate NY casinos for NYup.com, syracuse.com and The Post-Standard. Reach him at [email protected], or follow him at NYup.com, on Twitter or Facebook.