Cuomo, a three-term Democrat, is expected to designate online sports betting as a central part of his policy outlook when the governor delivers his annual State of the State address on Jan. 11. Cuomo’s abrupt policy change comes amid a cascading budget deficit, as the governor’s administration searches for new ways to generate revenue for a state devastated by the COVID-19 pandemic.
“New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis,” Cuomo said in a statement.
A multi-billion market
While Cuomo has previously opposed efforts to legalize the activity, the governor appeared to change his tune at a press conference last month when he listed sports betting and legalized marijuana as potential revenue sources for a state facing a revenue shortfall of nearly $60 billion.
Over the past two years, Cuomo’s administration has continually reiterated that a constitutional amendment is needed to legalize online sports wagering. The pathway, however, is time consuming, since a constitutional amendment must be approved by two consecutive sessions of the state legislature before it can go to a referendum. Under that pathway, it would take 36 months, at a minimum, to bring legalized mobile sports betting to New York. And there’s no telling how long it would take for sports betting operators to go live after that.
Cuomo indicated that sports betting in New York would be run by the lottery under his plan, but he did not address whether a constitutional amendment will be needed to legalize mobile sports wagering that way. But according to a 1984 state attorney general’s opinion, it would be. At the time, Cuomo’s father, then-Gov. Mario M. Cuomo, proposed a so-called sports lottery that would allow New Yorkers to legally wager on football and several other professional sports. The late governor’s initiative aimed to raise about $100 million for a wide assortment of education programs in the state’s fiscal budget. A Cuomo aide asserted that the 1984 initiative did not require a constitutional amendment.
1984 NY AG Opinion: "A proposal authorizing the Division of the Lottery to conduct a game in which bets are placed on the outcome of pro sports events would require an amendment to the State Constitution in order to be implemented." pic.twitter.com/1qRwwOMDaX
— Daniel Wallach (@WALLACHLEGAL) January 6, 2021
According to the governor’s release, “the New York State Gaming Commission will issue a request for proposals to select and license a sports operator or platform to offer mobile sports wagering in New York.” When asked Wednesday whether the state intends to license a single operator to offer mobile sports betting, thereby granting the operator exclusivity to run the market, New York State Gaming Commission spokesperson Brad Maione did not answer the question directly.
But Maione indicated that full details of the proposal will be part of the state’s Executive Budget which will be proposed no later than Jan. 19, he wrote in an email to Sports Handle.
That kind of model would be comparable to one in New Hampshire where the state lottery awarded an exclusive contract to DraftKings for sports betting. The lottery will also have its own app.
Last year, New York Sen. Joseph Addabbo Jr. made the claim that the state could generate $60 million in licensing fees, as well as $30 million in annual tax revenue. Addabbo, chairman of the Senate Racing, Gaming and Wagering Committee, previously stated that the first year of online sports betting could bring approximately $100 million in tax revenue to New York.
Last spring, Addabbo and J. Gary Pretlow, his counterpart in the General Assembly, recommended the inclusion of mobile betting in the state’s fiscal budget, but Cuomo did not include it. Months earlier, Addabbo convened a hearing in the state legislature on the prospects of mobile sports betting.
New York State Budget Director Robert Mujica indicated Wednesday that the state could generate hundreds of millions of dollars in additional revenue by constructing a sports betting framework through the state lottery. Under the lottery model, New York will contract with the private sector, which will run the mobile sportsbooks, while the state receives the majority of the remaining revenue after a portion is returned to bettors, Mujica noted.
Eight U.S. jurisdictions currently have live digital sports wagering regulated by state lotteries. But there is a difference between the lottery as the regulator (ala Tennessee or West Virginia) and the lottery having skin in the game, as it does in New Hampshire or Washington, D.C. In Tennessee and West Virginia, independent commercial operators — DraftKings and FanDuel are live in both states — operate digital platforms. The lottery merely regulates and enforces, and does not have a sports betting product. In both New Hampshire and Washington, D.C., the lottery either does or will offer its own product while also overseeing commercial sports betting. Virginia will join the list of lottery states when operators go live (hopefully before the Super Bowl), and will use the Tennessee and West Virginia models.
“I’m not here to make casinos a lot of money, I’m here to raise funds for the state,” Cuomo said at the press conference.
New York, with a population of nearly 20 million, dwarfs any other state with legal betting, and should have no problem regularly topping $1 billion a month in wagers. https://t.co/hyGNGTFcMU
— Sara Slane (@Sara_Slane) January 6, 2021
Stiff competition with the Garden State
Addabbo, a Democrat from the 15th district in Queens, has criticized the state for dragging its feet on mobile sports betting, while hordes of New Yorkers travel into New Jersey to place wagers on their mobile phones. In November, bettors in New Jersey wagered a record $936.1 million on sports, crushing a previous monthly record by nearly $130 million. Although New Jersey operators won $50.6 million on the month, it translated to only $6.2 million in tax revenue for the state.
By operating a lottery model for sports betting, the state could generate an estimated $500 million annually, Mujica said, versus around $50 million a year by adopting a framework similar to the one used by New Jersey. The Cuomo administration is expected to unveil the model at next week’s State of the State address, he added.
At present, four Upstate 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 — accept legal sports wagers in a retail setting. FanDuel operates a retail sportsbook at Tioga Downs, while DraftKings runs a brick-and-mortar sportsbook at the del lago resort in Seneca County.
DraftKings shares surged more than 8% on the news, hitting an intraday high Wednesday of $51.79. In Europe, shares of Flutter Entertainment, the parent company of FanDuel, jumped more than 4.5% to a record high. MGM Resorts, which owns Empire City Casino in Yonkers, ticked up 1.75% to $30.89 a share.
“I’m absolutely delighted to see the support from Gov. Cuomo. Legalizing sports betting has the potential to bring leaking tax dollars back to New York from offshore books and nearby states. We’re eagerly awaiting next steps and have every intention of working closely with regulators in New York to bring BetMGM’s leading digital offering to the state,” BetMGM CEO Adam Greenblatt said in a statement.
Several sports-betting related stocks, including DraftKings and MGM, reversed course upon indications that New York could turn to a single-skin model, erasing most of the gains.