The entire process of starting mobile New York sports betting was one of contention and competition from the beginning, from legislators first trying to overcome then-Gov. Andrew Cuomo’s initial objection to internet gambling at all, to the tug-of-war in Albany as to what the marketplace should look like even after Cuomo did get onboard, to a bidding process imposed on gambling companies that resulted in operators accepting a 51% tax rate.
So, out of this drawn-out saga, who are the winners and the losers at this early stage?
The Winners
The New York Nine. On the surface, this seems obvious. The nine operators, in two groups, who were awarded licenses to operate in New York can now be bookmakers in the fourth largest state in the U.S., and the second largest state with sports betting (behind Florida) with the prospect of flipping the switch by the Super Bowl and maybe even by the NFL playoffs. They are: In the Kambi group, Resorts World, PointsBet, Caesars, Rush Street and WynnBET New York Sportsbook; and in the other group, FanDuel Sportsbook New York, Bally’s, DraftKings Sportsbook New York and BetMGM Sports Betting NY. And now the bad news for the New York Nine: The tax rate they’re saddled with, 51%, is so burdensome, many will have trouble making money. Considering a company like DraftKings just reported a $545 million loss for the third quarter of 2021, being in New York might simply an opportunity to lose more money.
NY Sports Bettors. What mobile sportsbook apps in NY will deliver to fans is that they get to wager on sports without having to either go to offshore bookmakers, where the financial transaction machinations can be a headache (and maybe even risky), or without having to travel to New Jersey. But as is the case with the online operators, there’s some bad news for bettors and it’s that tax rate thing again. With the operators coughing up so much in taxes, there’s doubt that those operators will be as generous with their New York sports betting promo codes as they are elsewhere. The guess is that, in the short run, the operators will do what they have to do to grab early market share and that will work to the benefit of the wagering public.
NY Taxpayers. That 51% tax is going somewhere and hopefully, from the taxpayers’ perspectives, it lightens their load. The estimate of tax revenue from online sports gambling is close to $500 million per year as the market matures. Sounds like a lot, doesn’t it? Well, the New York state budget is $212 billion. But every little bit helps, right?
Media Companies. To borrow a phrase from former presidential candidate Ross Perot, that giant sucking sound you hear is money being vacuumed up by local TV and radio stations and any other media platform that figures to be a megaphone for the marketing pitches of the New York online sports betting operators. Media outlets are guaranteed to make money without taking any of the risks of being a sportsbook. From an advertising standpoint, it’s like having an election all year long. Imagine the enthusiasm at YES Network, which is the dominant regional sports network in greater New York City and also is included in one of the operator groups.
NY Tribal Interests. The Kambi, et. al. group is partnered with the Oneida and St. Regis Mohawk compacted tribes. The FanDuel NY, DraftKings NY and BetMGM NY group includes the Seneca Nation.
The Losers
The Applicants Not Picked. Most prominent left on the sideline were Bet365 and Barstool Sports. There was an arcane and complicated scoring system tied to its Request for Applications that the New York Gaming Commission used to winnow the field and pick the winners. Apparently, Bet365 came close but its inclusion as a standalone entrant would have reduced the tax rate by a percentage point and that was enough to exclude them. Barstool is joined at the hip with Penn National Gaming. Penn National CEO Jay Snowden is saying that the tax rate is so high, it’s going to be tough to make a buck so he’s going with the “the grapes were probably sour anyway” narrative.
New Jersey. New Jersey has been considered the gold standard among states offering online sports gambling, as well as retail sportsbooks in Atlantic City, and the state has been running in the lead for handle in the U.S., buoyed, in part, by bridge-and-tunnel New York sports bettors traveling to make bets in the Garden State. The estimate has been that New Yorkers contribute about 20% of the New Jersey handle. So, Jersey is sure to lose some of that handle.Sports Fans Who Are Not Bettors. Along with everyone else, sports watchers are going to be bombarded with a relentless barrage of gambling advertising on TV. Gambling commercials also will be peppered throughout local programming but the gambling advertising will be particularly heavy during sports events. For sports viewers who consider themselves purists and aren’t interested in gambling or who are even opposed to it, the constant advertising will get really annoying really quickly.
TBD
Former NY Gov. Andrew Cuomo. First of all, Cuomo has bigger problems to worry about than his legacy regarding sports wagering, namely investigations related to sexual harassment allegations. But in terms of online sports gambling, Cuomo got some of what he wanted: A tax rate in the neighborhood of 50%. But the end result was not the single-operator model that he favored, such as the one in New Hampshire. And remember: There was a time when Cuomo didn’t want online sports gambling at all, but events, such as state budget concerns brought on by the COVID-19 pandemic, forced a change of mind. If sports wagering is a dependable source of revenue for the state, Cuomo can call that a win of sorts.
