Why NY Mobile Sports Betting May Look Like Pennsylvania

Posted on: January 24, 2021, 11:40h. 

Last updated on: January 24, 2021, 11:44h.

Mobile sports betting in New York is closer now to reality than it ever has been. That said, it’s a far cry from a slam dunk at this point.

Gov. Andrew Cuomo has come out in support of expanding sports betting. However, his plan is a radical departure from the plan lawmakers have in mind – one like a bill that already passed the Senate a couple of years ago.

State Sen. Joseph Addabbo (D-Queens) and state Assemblyman Gary Pretlow (D-Mount Vernon) want the state’s casino licensees to offer sports betting and they’re willing to give them an additional skin, which would expand the market to at least 14 operators in the state – once the three downstate casino licenses are approved. There’s also some opportunity for the state’s three Class III tribal gaming entities. The state would tax mobile revenues at 12 percent.

That model is similar to how states like Indiana and New Jersey handle sports betting.

Cuomo would rather cut out the middleman when it comes to sports betting. He wants the state to work with one operator or maybe more to receive a bigger cut. It’s a proposal likely to be modeled after New Hampshire’s system.

Judging from comments lawmakers made last week, it appears that the gap between Cuomo and lawmakers is a long one.

“This is much better than what the governor has put on the table or has laid out in his State of the State,” said state Sen. Pamela Helming (R-Canandaigua) at a Senate Racing, Gaming, and Wagering Committee meeting last week regarding committee chairman Addabbo’s bill. (See video below)

Helming, herself, wasn’t entirely on board as she expressed concerns about racinos being left out. Still, her comments help show where lawmakers stand. Both bills passed without a no vote in their committees last week.

With New York’s fiscal budget year starting on April 1, lawmakers and the Cuomo Administration have just more than two months to reach a consensus. Where may they end up when all is said and done?

The answer may lie in Pennsylvania.

Pennsylvania Made More Than New Jersey in 2020

At the 2019 Global Gaming Expo, former New Jersey Gov. Chris Christie went off on his neighboring state to the west. He called Pennsylvania’s sports betting system “a rolling dumpster fire.”

Pennsylvania requires a high barrier to entry with a $10 million license fee. In addition, it also features a 34 percent tax on revenues from sports betting.

New Jersey has made headlines in the latter months of 2020 as sports betting exploded nationally thanks to the return of major professional and collegiate sports returning from the COVID-19 pandemic. Just last month, it established a record-setting $996.3 billion handle from sports betting.

New Jersey’s totals are obviously helped by New York lacking mobile. It’s estimated that New Yorkers crossing the Hudson River make up about 25 percent of the Garden State’s market.

Meanwhile, Pennsylvania also set a new sports betting record for its state, with $548.6 million wagered in December.

Despite the differences in sports betting traffic, Pennsylvania’s “dumpster fire” system still generated more tax revenue for its state than New Jersey. In December, Pennsylvania generated $11.6 million in tax revenue, compared to New Jersey’s $8.3 million. For the 2020 calendar year, Pennsylvania made $64.5 million compared to $50 million next door.

As New York eyed a multi-billion dollar deficit and likely little help from Washington, Cuomo finally gave up his resistance to mobile sports betting. However, he did so saying he wanted to make $500 million annually from the game by issuing one or more licenses to companies that would give the lion’s share of the proceeds to the state.

This is not a money-maker for private interests to collect just more tax revenue,” the governor said during his budget address last week. “We want the actual revenue from sports betting.”

The governor’s budget proposal forecasts the state generating $357 million in sports betting in fiscal year 2023. The $500 million figure is what state officials expect from a mature sports betting market.

How Washington May Influence NY Sports Betting

Last month, when Cuomo first touted his plan for sports betting, he was looking at a different political reality than what we have now.

For months, Cuomo during his daily COVID briefings has touted one number, $15 billion. That was the projected shortfall New York officials forecast for the upcoming budget.

Cuomo has been insistent that Washington’s failures to keep European travelers out of the country in early 2020 set the stage for the health disaster the state faced in the first weeks of the emergency last year. He’s also mentioned numerous times that New York’s federal tax dollars are often used to subsidize other states. So, in his mind, the state is due for some payback.

Last month, Congress passed a COVID stimulus bill last month that included zero relief for state and local governments. At that time, it seemed apparent Republicans would retain control of the Senate for the 2021-22 Congress, making Cuomo’s hopes of getting that federal aid a long shot.

It was at that time when Cuomo started speaking about sports betting publicly.

But then another long shot came through. Georgia elected two Democrats to the US Senate, giving them control of both chambers of Congress and the White House. It led to Cuomo making last-minute changes to his State of the State speech.

There’s also a group of lawmakers in Albany that have been pressing for more progressive taxes, including higher taxes on top wage earners. Cuomo has preferred to not do that out of fear it may drive more taxpayers out of state. That sets up a possibility for lawmakers and administration officials to reach an agreement on how to assess new revenue sources, such as mobile sports betting and legalized recreational marijuana.

But that, ultimately, may depend on just how big a check Congress cuts New York.

Spectrum Study Says NY Sports Betting May $1 Billion in Revenue

Earlier this month, Spectrum Gaming Group shared its market study of the state with the New York State Gaming Commission. It forecasts annual gross gaming revenues for expanded sports betting at $816 million to $1.1 billion.

For its report, Spectrum only laid out tax revenue based on a 10 percent projection, probably because Cuomo’s proposal came too late for analysis. That meant tax estimates at up to $104 million annually.

However, if the revenue analysis is feasible, and there are others who believe the same way, then New York could set a high tax rate on revenues, generate a return acceptable to Cuomo, and still create a system that allows for multiple operators to set up shop.

It may not be popular, but Pennsylvania has shown that a high tax rate hasn’t been as big a deterrent as some expected it to before sports betting. It may also end up being the key to make mobile a reality in New York.