On Wednesday, a panel of renowned industry experts tackled a litany of issues associated with proposed plans to bring online sports wagering to New York, ahead of an April 1 deadline to enact the state’s 2021-2022 budget. As neighboring New Jersey continues to set monthly records for online handle, the panelists agreed on one piece of the intricate puzzle: New York cannot afford to drag its feet on legalizing mobile sports betting any longer.
In January, Gov. Andrew Cuomo reversed a long-standing position against mobile sports betting, an activity he previously expressed resistance to bringing to New York. Citing the state’s historic economic strife brought about by the COVID-19 pandemic, Cuomo pointed to online sports wagering as a mechanism for helping curb a historic budget deficit estimated at north of $50 billion over two years.
ICYMI: I'm proposing legislation to authorize mobile sports wagering in NYS.
Online sports betting is a rapidly evolving market and allowing it in New York will keep revenue here at home that can help us rebuild post-COVID.#SOTS2021
— Andrew Cuomo (@NYGovCuomo) January 11, 2021
Embroiled in two scandals, including allegations of sexual harassment by two former staffers, Cuomo had his emergency pandemic powers stripped by the New York legislature earlier this month. With Cuomo occupied by the controversies, numerous stakeholders have wondered aloud whether his administration can devote enough time to answering germane questions on mobile sports betting related to the state budget.
The scandals were not addressed during Wednesday’s hour-long webinar. The webinar, titled “The Future of Sports Wagering in New York,” marked the second part of the school’s 2021 Warren M. Anderson Legislative Seminar Series.
After a seventh woman accused Cuomo of sexual harassment on Friday, Cuomo described the latest accusations as simply untrue. In response to the allegations, Cuomo has asserted that he does not believe that he acted inappropriately.
Breaking down the bidding process
Under Cuomo’s proposal, the New York Gaming Commission would be tasked with selecting a platform provider or multiple providers for operating mobile sports betting through a competitive bidding process. As part of the process, Cuomo supports a model comparable to the public-private partnership in New Hampshire, where the state lottery awarded an exclusive contract to DraftKings for sports betting.
Daniel Wallach is the founder of Wallach Legal LLC, a law firm devoted exclusively to the burgeoning sports betting industry. During the webinar, Wallach outlined issues related to a competitive bidding process that could ensue if mobile sports betting is included in the state budget. Two states in particular, New Hampshire and Rhode Island, employ lottery-run models for sports betting, but each has a state population of around 1 million. The population of each state is about 5% of New York’s population. While the model may work in smaller states, it could be more difficult to implement in the nation’s largest jurisdictions.
According to Albany Law, through November 2020 operators in the two states generated gross gaming revenue of less than $60 million combined dating back to the Supreme Court’s 2018 decision to overturn PASPA. By comparison, New Jersey sportsbooks took in revenue of $725.5 million, a more than 10-fold increase throughout the period. A considerable portion (up to 20%) of New Jersey’s sports betting proceeds come from New York City customers, who reputedly make short drives across the George Washington Bridge specifically to place wagers on their mobile smartphones.
“To look at New Hampshire as a model for New York just doesn’t make sense given the land mass and the population size,” Wallach said during the webinar.
The bidding process could be lengthy, the panelists cautioned. If there is a line item on mobile sports betting in the budget, the state’s gaming commission will still need to issue a request for proposals (RFP) to select one or more operators to offer online sports wagering statewide. In New Hampshire, it took the state about two months to draft an RFP, Wallach explained. The timeframe from the passage of a law to when a sportsbook accepts its first mobile wager could take as long as six months when you take into account the procedural requirements associated with the RFP process, he added.
While a bid challenge may not stop the implementation of mobile sports wagering, it could introduce another layer of complication that could be avoided, Wallach noted. Since Cuomo’s announcement in January, a number of stakeholders have expressed concern that New York could sole-source an online sports wagering contract to a single operator. If a sportsbook is granted exclusivity to New York’s mobile sports betting market, the bid process could be met with legal challenges.
Recently @AmericanGaming made the case for non-monopolistic online market in NY
"Competition helps create customer-focused, innovative marketplaces that can effectively stifle the illegal market & generate much-needed tax revenue."
— Sports Handle (@sports_handle) February 1, 2021
A thorny issue for New York political leaders in the coming weeks pertains to language surrounding the constitutionality of mobile servers that sportsbook operators would use to process online sports wagers. On the legislative side, a bill sponsored by Sen. Joseph Addabbo Jr., S 1183, requires the server in question to be physically located in a “licensed gaming facility,” in accordance with gaming commission regulations.
New Jersey allows iGaming from anywhere in the state because the servers associated with the online gambling are housed at the Atlantic City casinos, and thus the bets are still considered as being placed at the casinos. The New York mobile sports betting bill works the same way.
— Daniel Wallach (@WALLACHLEGAL) October 21, 2020
The bill also enables casinos to enter into agreements with sportsbook operators or so-called affiliates to allow authorized bettors to register and fund accounts on mobile sports betting platforms offered by the casinos. Any professional sports venue, licensed racetrack, or off-track corporation qualifies as an affiliate under Addabbo’s bill.
Bennett Liebman, a government lawyer in residence at Albany Law School, also took part in Wednesday’s webinar. Liebman, who formerly served as the state’s deputy secretary for gaming and racing, expressed several concerns regarding server issues in mobile sports betting. In other areas of business across the state, the site of a server is not used to determine the location of commercial transactions. Liebman pointed to areas such as insurance, banking, sales tax, and stock transfer tax when constructing his argument.
For fiscal year 2022, online sports betting is projected to bring the state $49 million in revenue, according to Cuomo’s Executive Budget projections. There is a step-up to $357 million by fiscal year 2023, along with further projected increases to $493 million by FY 2024-25. As a result, the panelists urged state leaders to settle any differences that impede the legalization of mobile sports betting in New York.
Both chambers of the New York Legislature are scheduled to release their budgets for the upcoming fiscal year on March 15.
New York State “should be a part of online wagering, that’s the bottom line,” said Stacey Rowland, who serves as vice president and general counsel at Rivers Casino & Resort.