Sticker Shock: NY Casino License Could Cost $1 Billion

As budget time approaches in New York State, one issue before lawmakers is the potential cost of a casino license. How does $1 billion sound? The state may license up to three casinos in and around New York City, two of which are almost pre-determined.

Sticker Shock: NY Casino License Could Cost $1 Billion

New York isn’t called the Empire State because of Star Wars. It’s because New York does everything in a big way, and that includes gambling, especially in and around New York City.

Want proof? The record setting rollout of mobile sports betting. More than $3.5 billion has been bet since the wagers began January 8. The high tax rate for sportsbooks is another—51 percent. But why stop there?

The license fee for one of three so-called downstate casinos—New York City and environs—was expected to be $500 million. But the state Senate has proposed doubling the fee for a nice round $1 billion.

Both the Senate and the Assembly each must produce a one-house budget for the next fiscal year, which begins April 1. The Senate version included the following: the state gaming commission’s board “shall determine a licensing fee to be paid by a licensee within thirty days after the award of the license which shall be deposited into the commercial gaming revenue fund; provided however that such licensing fee shall be no less than one billion dollars per license.”

There you have it. Except the Assembly one-house plan makes no mention of a figure. The two houses will negotiate the fee as part of the budget process.

As for three licenses, the Senate proposal has hinted in strong language that two of those licenses be awarded to Resorts World New York in Queens and Empire City in Yonkers. The proposal encourages state regulators to “consider private capital investment made previous to the effective date” of the license, according to Politico.

This year, the treatment of gaming in the state budget could open the state up to more online sportsbooks and accelerate the awarding of downstate New York casinos. For that to happen, though, current proposals need to survive the reconciliation process.

An amendment from Senator Joe Addabbo would bump up the process of licensing downstate casinos from 2023 to 2022. State law does not allow the new licenses to be given out until 2023, but Governor Kathy Hochul proposed state budget moves up the timeline. It would give Class III licenses to MGM Empire City in Yonkers and Resorts World NYC in Jamaica. That would allow those properties to transform from “slot parlors” to fully-fledged casinos with retail sportsbooks and table games. Then, another Class III license would be the prize in a bidding process. Bidders for that final license are expected to be Las Vegas Sands, Bally’s Corp., Hard Rock International and other big players in the industry.

Perhaps overshadowed but also of importance is a pair of gambling measures in the budget. The Senate plan also doubles the current eligible sportsbook operators to 16, while the Assembly goes to 14 vendors, but 30 percent of them would be minority owned businesses.

New York’s mobile sports betting action continues to concentrate in the four major operators at the same time state leaders seek to expand the number of sportsbooks.

The handle for the week ending March 6 came in at almost $340 million with FanDuel’s market share at 40.5 percent, DraftKings at 25.6 percent, Caesars at 18 percent and Bet MGM at 10.8 percent. The remaining 5.1 percent was divided among WynnBET, PointsBet and BetRivers, according to Play USA.

Legislators in both the state Senate and Assembly have introduced companion bills that would usher in at least five new operators by January and more beyond that, lowering the tax rate for all operators from 51 percent, the highest such rate in the nation. State Assemblyman J. Gary Pretlow told NY Online Gambling this week he is looking to add 10 new operators in the long run, lowering the tax rate to 25 percent.

“The big guys are still going to glom up a lot of the major players, but it gives someone else a shot,” Pretlow said.

“We’re looking more toward conversion: if you can convert an existing facility to a full-fledged casino, then that would be acceptable,” he said. “If we can do a conversion, then it’s a slam dunk for Genting-owned Resorts World and MGM’s Empire City.”

If approved, the state Gaming Commission would establish a bidding process to apply for the licenses, similar to how four upstate casinos were picked in 2014. So strong support among lawmakers does not guarantee Genting and MGM would be an automatic pick.

Although Manhattan or Brooklyn would be acceptable for a third casino, opposition from both boroughs might sink each.

Senate Finance Chair Liz Krueger says if the bidding goes forward community support would be a critical factor in the siting. “I just want to make sure that they cannot bigfoot any specific neighborhood to take a casino that they don’t wish to have there,” she said.

Asked if she thought Manhattan residents would back a local casino, she responded: “My gut is that there would not be community support for a casino in almost anywhere in Manhattan.”

Will New York online sportsbooks get the tax break, grow in number?

Addabbo believes the statute does not allow the tax rate to be changed, according to PlayNY. Then again, budget reconciliation is meant to iron out differences between the Senate and Assembly. Then again, with three operators accounting for more than 90 percent of the sportsbook market in New York, will adding more operators make up for the loss of tax revenue? Do the math.

The request for proposals includes a scoring factor that boosts diversity in the market, embracing minorities, women, and service-disabled veterans in applicant ownership, leadership, and workforce, according to CasinoBeats.

Should online casinos survive, commercial casinos and tribal nations would have the option to run online slots and table games within state boundaries, for a $2 million fee.

Meanwhile, as New York State enjoys the meteoric rise of mobile sports betting, lawmakers see more gold in online and land-based casinos in and around New York City, and a potential marriage of sports betting and horse racing.

Legislators have different opinions about how the state should help save the racing industry. Opposing bills are bouncing around the legislature.

Last November, New York Senator Joe Addabbo introduced a bill that would legalize fixed-odds betting on horse races in the state. S7536 would also permit state racetracks to house sports betting kiosks. The New York Racing Association welcomes the opportunity.

Last month, a coalition of legislators from both chambers introduced a pair of bills in both the state General Assembly and Senate. A07745 and S07260 would repeal tax exemptions for certain racehorses. A08468 and S07260 would redirect tax funds from video lottery terminal revenue that currently goes to support the state’s racetracks to other items in the state budget.

“At a moment when our working-class communities so desperately need funding for critical services like education, human services, and economic justice, to prop up a deadly industry that often abuses and neglects the horses in its care and is known for violations of workers’ rights, with $230 million of New York taxpayers’ dollars, is not right,” New York Senator Robert Jackson said.

Addabbo said the bills would kill the horse racing industry in the state.

Yet, the action on all the bills in both chambers has stalled for weeks. Work on the state’s budget for the next fiscal year has taken precedence in the New York Senate. That’s also shifted focus as far as the future of gambling in New York goes as well.

Addabbo pushed online casinos, a law he admits is a long shot.

Given Pretlow’s hesitation to push for it and Addabbo’s pessimism, that conversation could fizzle out altogether soon. That would clear the way for the dialogue to turn back to the future of horse racing.

Most of the debate could center on the coalition bills as opposed to Addabbo’s fixed-odds proposal. The coalition, officially the Campaign to End Horse Racing Subsidies, has some strong allies.

There are also organizations outside the state legislature that have gone on the record against the quartet of bills. They have formed their own group called We Are NY Horse Racing. The members include:

Both groups have started creating messaging to provide their spin to the public.

Perhaps most important to the future of these bills, Addabbo and Pretlow chair the gaming committees in their respective bodies. S08485 is currently on Addabbo’s committee. The other three could very well go through those committees if they do proceed.

It seems that Addabbo’s vision for the future of horse racing in the state is not only to maintain its current level of support but expand its offerings. Those two visions are irreconcilable. Someone is about to be disappointed, and the gates on the track to one of these outcomes could open soon.

In related news, the sportsbook subsidiary of Caesars Entertainment Inc. will add a new horse racing wagering app in the spring in New York. The app, The Caesars Racebook app, in partnership with NYRABets LLC, will offer bettors the opportunity to place a wager on races from more than 250 tracks around the world.

“Following our successful roll-out of Caesars Sportsbook, we’re delighted to launch Caesars Racebook in partnership with NYRABets,” Dan Shapiro, senior vice president and chief development officer of Caesars Digital, said in a release. “NYRA conducts world-class horse racing and NYRA Bets has access to the best horse racing content from around the world, including from Caesars-operated racetracks.”