It’s official. Mobile sports betting is the law of the land in New York State. The question now is whether the agreed-upon business mode, two licensees and the state as a partner, will pay off.
That’s the model Governor Andrew Cuomo demanded when he dropped his longstanding opposition to mobile betting earlier this year, pressured by the damage wrought by Covid-19 on the state economy and its public finances. It’s the model incorporated in the $200 billion state budget the governor signed on April 19.
While many of the details remain to be filled in, the plan basically will work like this:
On July 1, the New York State Gaming Commission will begin accepting proposals, then select up to two providers, based in large part on how much of their projected revenues they’re prepared to share with the state.
In exchange for the oligopoly, Albany is expecting something along the lines of a 50-50 split. Partnerships with tribal operators will be good for extra points in the process. The winners will pay $25 million each for 10-year licenses that will come with up to four skins each.
The state’s four upstate commercial casinos and, presumably, some or all of the seven tribal casinos will be relegated to hosting the servers for an annual fee of $5 million.
The model owes much of its thinking to the system devised in New Hampshire, where DraftKings was granted a monopoly in exchange for 51 percent of the revenues.
“There are two ways to do it,” as Cuomo explained it at one point. “You take the casinos in the state, and you give them the license to run mobile sports betting, and then they operate it and they make the profits. They would pay taxes to the state, but the casinos make the profits.
“The second way to do it is the way we do the state lottery. We will contract directly with the mobile sports vendor. We don’t need the casinos as a middleman. My position is the state should make the money directly, and then let the state decide what to do with it.”
It isn’t what state Senator Joseph Addabbo, a longtime sports betting advocate, had in mind.
But as he told GGB News, “We could’ve dug in our heels and said, ‘No, it’s got to be our way or no way,’ and you and I wouldn’t be talking today. We had to be flexible. But that flexibility, I think, will provide us with a lot of opportunities.”
Addabbo, chairman of the Committee on Racing, Gaming and Wagering in the upper house, introduced legislation in January in partnership with J. Gary Pretlow, his counterpart in the state Assembly, that envisioned up to 14 licensees: two each for the four commercial casinos and the state’s three gaming tribes, supplemented by casino-sponsored betting kiosks at professional sports stadiums and OTBs.
Based on tax rates of 8.5 percent for retail bets and 12 percent for online bets, the bills projected around $139 million to $174 million for the state annually, assuming handle in the range of $24 billion to $30 billion.
Cuomo is looking for way more than that. His administration projects the two chosen operators will generate upwards of $500 million a year for the state by fiscal 2025, assuming $20 billion in bets and a standard hold rate of 5 percent.
New Jersey, with less than half New York’s population, may have seen upwards of $8 billion bet with its 14 licensed bookmarkers last year. The state won a nation-leading $398.5 million. How much of that came from the pockets of New Yorkers? Estimates vary, but generally it’s believed to have been around 20 percent; one study found that in 2019, New York residents wagered $837 million in New Jersey on sports bets, while still others are choosing a less savory alternative: illegal bookies and unregulated offshore operators.
For Addabbo, the important thing now is to get the market up and running—hopefully before Super Bowl 2022—and let the quality of the product and the bettors do the rest.
“I’m enthusiastic and I’m optimistic about the potential,” he told GGB. “Right now, we’ve got a lot of money leaking out to other states, and that’s the issue. But we’ll have more than one provider, and that bodes well. Because we’re asking a lot. We’re asking New Yorkers to stop what they’ve been doing. We’re asking them to leave their comfort zone and try us, and hopefully stay with us in what is a very competitive marketplace.
“But it’s doable if what we’re offering them is a premier product. That’s the key. It’s not going to be just any operator. We’re looking for nothing less than the top tier.”
