The clock is ticking. Days after New York political leaders finalized a deal that is expected to pave the way for the legalization of marijuana in the Empire State, negotiations on mobile sports betting may head into overtime this week ahead of Thursday’s deadline to pass the state’s fiscal year budget.
Online sports wagering has been linked inextricably to recreational marijuana in recent weeks since Gov. Andrew Cuomo pointed to both as mechanisms for curbing a historic budget deficit, at a time when residents are leaving the state en masse due to COVID-19. But the potential legalization of mobile sports betting in New York is rife with complexity, as negotiations between the governor’s office and legislative leaders go down to the wire this week.
If the parties agree on a deal to include mobile sports betting in New York’s Fiscal Year 2022 budget, the New York State Gaming Commission will likely be tasked with crafting rules for regulating the activity before online sports wagering can go live. Even if a framework for mobile sports betting formally appears in the budget, it could take months before the rules are finalized. Such an inclusion, however, will represent the most progress yet in allowing New Yorkers to bet on sports (legally) from their smartphones.
If a line item for mobile sports betting does in fact make it into the fiscal year budget, negotiations likely will need to be completed by some point on Tuesday for the budget to be passed on time, a high-level source with knowledge of the negotiating process told Sports Handle. A completed deal on Tuesday will give the legislature ample time to vote on a potential bill before Thursday’s deadline.
Otherwise, the timely passage of a budget could be delayed or online sports wagering might be left out of the budget entirely.
1) State-run model vs. private model
Negotiations may end in a stalemate if the three parties (the governor’s office, the state Senate, and the state Assembly) cannot reach a compromise on an equitable revenue-sharing plan between the state and sportsbook operators. When Cuomo made his annual State of the Budget address in January, he outlined a public-private partnership for mobile sports betting similar to one currently in place in several states, most notably New Hampshire. As part of a revenue-sharing model in the Granite State, DraftKings is paying New Hampshire 51% of its monthly gross gaming revenues from online sports wagering in exchange for exclusivity in the state’s marketplace.
The model could bring New York an estimated $500 million in annual revenue at maturity, according to Cuomo’s budget director, Robert Mujica, or more than 10 times the revenue neighboring New Jersey brought in from taxes on online sports wagering in 2020. The projections could require New York to handle upward of $20 billion in mobile sports wagers a year, a figure that has been met with skepticism from industry experts.
A competing model crafted by Sen. Joseph Addabbo Jr. calls for the issuance of up to 14 mobile sports betting skins or brands, while Cuomo’s model appears to limit online sports wagering to four Upstate sportsbooks, at most. The divergent proposals do not appear to offer any middle ground, which brings us to the next issue…
2) A hybrid model
Addabbo, who serves as the chairman of the Senate’s Racing, Gaming and Wagering Committee, believes he has authored an inclusive bill that meets the needs of a wide range of stakeholders, from professional sports leagues and sportsbooks to racetracks and tribal casinos. Besides articulating the aforementioned issues, Addabbo’s bill also details how funds from sports betting would assist leagues in tackling integrity concerns and help combat problem gaming.
“The governor’s proposal has a lot of empty space,” Addabbo told Sports Handle. “You have a proposal on the governor’s side that has such a lack of detail. You would think that there’s room to negotiate.”
To that end, Addabbo said, the Senate’s legal team has proposed a hybrid model that aims to make a state-run system more inclusive. A hybrid model still allows New York state to enter into a revenue-sharing plan with mobile operators, but it increases the number of books that can participate. The model also allows arenas, racetracks, and tribal casinos to take part in mobile sports betting, several areas that Cuomo’s model has yet to address. Addabbo believes the governor’s office is currently reviewing language in the proposal.
Until the NYS budget negotiations are complete, I will be advocating for mobile sports betting to be included so our residents have a legal, safe way to wager in their own state, while also recognizing increases in revenue, educational funding, addiction programs and jobs.
— SenatorJoeAddabbo (@SenJoeAddabbo) March 28, 2021
“There’s ways for the state to run it and incorporate these other entities,” Addabbo said. “We have a golden opportunity.”
3) Downstate casino licenses
When both chambers unveiled one-house budget bills earlier this month, the Senate included a line item for the issuance of three Downstate casino licenses, while the Assembly did not. The licenses could carry a price tag of $500 million each, generating a one-time payment of $1.5 billion to the state.
Before New York can award the licenses, the state must lift a 10-year moratorium that banned new casinos in numerous Downstate regions until 2023 at the earliest. Addabbo believes that efforts to fast-track the licenses have been met with resistance from Assembly Speaker Carl Heastie. It appears that the Senate and Assembly will need to be in lockstep on a Downstate license plan for the proposal to make it into the budget.
Furthermore, Addabbo argues that a pathway through the budget should be taken because the Downstate casinos serve as both a fiscal generator and a jobs creator for the state.
“If they don’t want to do it, then they should look those workers in the eye and say we didn’t create job opportunities for you,” Addabbo said.
Two racetracks, Empire City Yonkers and Aqueduct Racetrack in Queens, have emerged as potential sites for two of the casinos. A bidding process for a third site can be held separately, Addabbo noted.
J. Gary Pretlow, Addabbo’s counterpart in the Assembly, has expressed concern that a bidding process for a third casino could be met with legal challenges that may impact the opening of the two other sites.
VIDEO: I joined @SArbetter on @CapitalTonight earlier this week to discuss a wide range of New York gambling topics, including how mobile sports betting legislation likely gets resolved and whether 3 downstate casinos will be approved this year. https://t.co/QqrgdQzPEL
— Daniel Wallach (@WALLACHLEGAL) March 26, 2021
4) Tribal sports betting
The latest proposal from Cuomo, as it relates to mobile sports betting, does not include any of New York’s tribal casinos. New York has more than a dozen federally approved Indian gaming operations, including several owned by the Oneida Indian Nation. In an appearance at a sports betting webinar last week, Oneida Nations Enterprises CEO Ray Halbritter said that he believes New York will legalize mobile sports betting at some point this spring. If online sports wagering is included in the budget, there is a stronger chance a bill on mobile sports betting will be enacted, he added.
Halbritter is seeking a technical clarification to the Indian Gaming Regulatory Act (IGRA) regarding mobile sports betting. For mobile sports betting to be allowed on New York tribal properties, Halbritter is pushing for a change in the IGRA that permits the activity if a mobile server is located on tribal land.
At present, tribal sportsbooks under the IGRA can only offer mobile betting for events that physically take place on tribal areas.
5) A timely budget
Against a tense political backdrop, Cuomo can ill-afford to delay the passage of the budget beyond Thursday’s deadline. Cuomo, a three-term governor, is facing dual scandals featuring allegations of under-counting the nursing home fatality count from the COVID-19 pandemic and multiple accusations of sexual harassment in the workplace. A lengthy budget delay would provide another public relations hit.
During the 1990s, leaders on both sides commonly employed budget stalling methods as a political maneuver to rankle their opponents. But in Cuomo’s first seven years in office, the budget passed on time on six occasions.
Legislation in New York must age for three days before it comes up for a vote, but Cuomo has the right to waive the aging period for emergency bills. For his part, Addabbo is confident that the budget will pass on time this week.
“I’ve been around long enough to see things fall apart, but I will remain optimistic that we will pass a budget on time by April 1,” Addabbo said.