New York Gov. Cuomo Doubles Down On Mobile Sports Betting, Projects $500 Million In Revenue In Fiscal Year Budget

New York Gov. Andrew Cuomo outlined the state’s framework for mobile sports betting Tuesday in New York’s fiscal year executive budget proposal, potentially setting the stage for a contentious negotiating period with legislative leaders in the weeks ahead.

During Tuesday’s State of the Budget address, Cuomo emphasized that mobile sports betting could raise $500 million in annual revenue under a state-run system, which draws comparison to the model New York uses for operating the state lottery. Cuomo, a Democrat, previously expressed resistance to legalizing the activity, dating back to the repeal of PASPA in May 2018. But the three-term governor shifted his policy on online sports betting in recent weeks amid the state’s ballooning budget deficit, as the New York economy continues to feel the devastating effects of COVID-19.

Earlier this month, Cuomo gushed about the prospects of mobile sports betting in New York, describing the Empire State as “potentially the largest market in the nation.”

“This is not a money maker for private interests,” Cuomo said in Tuesday’s address. “We want the actual revenue from the sports betting.”

Examining the numbers

At Tuesday’s address, Cuomo painted a dim view of the state’s finances, while identifying a revenue shortfall of $39 billion in New York’s four-year financial plan. Ravaged by dwindling tax receipts from the pandemic, Cuomo said the state has experienced a two-year revenue loss of $21 billion. Cuomo’s administration will look to mobile sports betting and the legalization of adult-use cannabis to help offset some of the losses.

Prior to the pandemic, New York appeared to be on solid economic footing in 2020. The state also maintained its lowest debt levels in more than 60 years, while its credit ratings were the highest since 1972, New York State Budget Director Robert Mujica said during a presentation on Tuesday afternoon.

Currently, four Upstate, non-tribal casinos — Tioga Downs Casino in Tioga County, Resorts World Catskills in Sullivan County, Rivers Casino in Schenectady County and del Lago Resort & Casino in Seneca County — offer legal sports betting in a retail environment. DraftKings operates a brick-and-mortar sportsbook at the del Lago resort, while FanDuel runs a retail sportsbook at Tioga Downs.

Based on trends in other states, New York can generate $500 million annually if the state collects the sports betting revenues, rather than private operators, Mujica estimated. If the state employed a model similar to one in New Jersey, the figure would fall closer to $50 million Mujica said earlier this month.

The state’s $500 million estimate is a fully annualized, recurring number from a mature New York sports betting program, he added. Based on population, New York (19.5 million) would, in fact, be the fourth-biggest market in the U.S. behind California (37.7 million), Texas (27.7 million), and Florida (21.5 million). Estimates for sports betting revenue in an open, competitive, mature market in California range between $234.8 million (per the 2017 Oxford Economics Study) and $700 million (per one senator). Oxford estimates $123.7 million in tax revenue based on a 10% tax rate for New York. So an estimate of $500 million in tax revenue in New York could be a reach, unless the state can strike a deal with one or more operators.

Another study has more optimistic projections for the future size of the New York market. By 2030, the U.S. legal sports betting market could balloon to $15 billion, according to a June 2020 note from Bank of America analyst Shaun Kelley. The aforementioned four states could account for $3 billion combined, Kelley projects. With about 4% of the market, New York would generate $600 million annually, he found.

More immediately, the Cuomo administration projects Fiscal Year 2022 (beginning April 1) mobile sports betting revenue of $49 million, according to estimates released Tuesday in New York’s Executive Budget Briefing Book. For Fiscal Year 2023, the administration projects estimates of $357 million from revenue through mobile sports wagering.

Earlier Tuesday, a New York Senate committee discussed several gaming-related measures at a hearing, held via webcast, including a bill related to the legalization of mobile sports wagering. The bill, S 1183, allows a casino to contract with up to two independent operators to provide its mobile sports wagering platform. Authored by Sen. Joseph Addabbo Jr., the bill passed through the Senate’s Racing, Gaming, and Wagering Committee by an overwhelming margin and was referred to the Senate Finance Committee. Addabbo amended a previous incarnation of the bill, which entitled casinos to one “skin,” or license, to contract its mobile sports betting platform to an independent operator.

Under Governor Cuomo’s proposal, the New York State Gaming Commission will issue a request for proposals (RFP) to select one or more providers to offer mobile sports wagering in New York. The operator(s) or platform(s), according to the proposal, must have a partnership with one of the existing licensed commercial casinos.

Addabbo’s bill allows for up to 14 mobile sports betting skins across the market. The legislation also potentially opens mobile sports betting to professional sports venues, tribal casinos, and off-track betting parlors, a key distinction from Cuomo’s proposal.

“Unfortunately, at this point it differs with the Governor’s intentions, but we are hopeful we can negotiate a successful mobile betting scheme,” Addabbo said at Tuesday’s hearing.

“This is an inclusive bill that has widespread industry support with analysts and legal scholars in the gaming industry. It really depends how we negotiate this during the budget process,” he added.

Complex server questions

Sen. Shelley Mayer expressed concern at Tuesday’s hearing that MGM Resort’s Empire City Casino could be cut out of New York’s mobile sports betting market. Mayer urged Addabbo to broaden the bill to include facilities with Video Lottery Terminals (VLTs), such as Empire City Casino at Yonkers Raceway. Mayer, a Democrat from the 37th district, represents Yonkers, where Empire City Casino is located.

Under Addabbo’s bill, a licensed casino will be able to offer mobile sports betting if a server processing the bets is physically located inside the casino. Some proponents of mobile sports betting hope to expand the provision to include authorized gaming facilities, but questions persist on whether a constitutional amendment is required for facilities to legally accept mobile sports wagers through a server located outside a casino.

The server or other equipment which is used by an operator to accept mobile sports wagering shall be located in the licensed gaming facility in accordance with regulations promulgated by the commission.

New York Senate Bill S 1183

Bennett Liebman, a government lawyer in residence at Albany Law School, previously served as the state’s deputy secretary for Gaming and Racing and advised Cuomo on gambling-related issues. Liebman, who helped write the server provision in the 2013 Upstate New York Gaming Economic Development Act, indicated that state gaming leaders back then did not anticipate that the issue would impact mobile sports betting nearly a decade later. While Liebman noted that the server topic raises some intriguing issues as it relates to mobile sports betting, he added that the state does not use the site of a server as the determinant for regulation of other areas such as insurance and taxation matters.

“You’re really playing with some difficult issues here,” Liebman told Sports Handle. “I’m not sure everyone has thought it out.”

At the moment, it is unclear when the Gaming Commission plans to publish the results of the RFP. Negotiations between the governor’s office and the legislature could become tense, according to industry sources, if there are indications that a single operator will gain exclusivity to run the mobile sports betting market in New York.

New York’s fiscal year for 2022 is scheduled to begin on April 1.

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