Six weeks after the New York State Senate held a hearing on the potential of New York sports betting, Chairman of the Committee on Racing, Gaming and Wagering, John Bonacic (R-42nd District), introduced Senate Bill S7900, which would legalize sports betting in New York. That’s pending the repeal of PASPA in the Supreme Court, of course, or a change in federal law.
New York is in an interesting, if not precarious position regarding the legalization of sports betting, having previously executed a state constitutional amendment in 2013 that authorizes sports wagering at some commercial casinos. But that doesn’t help the state’s various racetracks, racinos, tribal casinos or Off-Track Betting parlors seeking the same ability to offer their patrons a place to put down a bet.
The January 24 hearing was lively with testimony from NBA Executive Vice President and Assistant General Counsel Dan Spillane, who has been collecting a lot of airline miles at various state hearings. It was here that Spillane publicly outlined the league’s major talking points or demands for a 1% off-the-top direct cut of the action as a so-called “integrity fee” (amounting to 20-25% of operator revenue); these arguments have since disassembled in West Virginia and Connecticut. But the leagues may come away with a smaller cut in New York if S7900 goes through as-is. Let’s take a look key components of the bill.
Senator Introduces (New) New York Sports Betting Bill to Legalize Sports Wagering in New York; S 7900 Marks a Win for Sports Leagues
S7900 would amend §1367 of the state’s racing, wagering and breeding laws that discuss sports wagering. This bill represents the committee’s desire to open up sports wagering — on professional and collegiate sports events — to the aforementioned variety of gaming entities. It would allow an OTB, licensed franchised corporations, video lottery operators at an aqueduct, or racetracks licensed by the state, to allow sports wagering on premises and on mobile devices — after patrons sign up at a facility in person.
(1) Who’s in charge: The New York State Gaming Commission would manage licensure and have responsibility for the implementation of the law/sports wagering. An entity’s license to operate a sportsbook would be in addition to any other license required to operate a gaming facility.
(2) The state tax: 8.5% of sports wagering gross gaming — plus a 0.25% “integrity fee” benefiting the sports leagues. But this fee is capped at 2% of a casino’s sports wagering gross gaming revenue. Given the cap, it’s not quite an off-the-top cut, also it shields casinos/operators from having to pay the fee in the event of a loss. Still, it will likely represent an additional 2%, making the effective rate about 10.5%, depending how a sportsbook performs in any calendar quarter. (The fee is due quarterly.)
(3) What’s that “integrity” fee aka royalty used for? Integrity stuff:
The bill also gives the commission some authority to audit this usage, but any funds not used for the functions noted above would still go to the leagues on pro-rata basis.
(4) Mobile sports wagering: That’s a go, through approved mobile applications and online websites.
(5) Sports wagering means: Single-game wagers, teasers, parlays, in-game wagering, props and more; however:
(6) There are “tiers” or classifications of wagers at play: This is a new one, a bit strange, and appears destined to become a conflict in the future. Take a look:
(a) The reason for these tiers: S7900 would allow casinos to use whatever data source they deem appropriate for grading Tier 1 wagers.
(b) For Tier 2 wagers — in-play wagers — operators would be required to use sports leagues’ official league data, or whichever entity the league has contracted to generate that data.
(c) For Tier 3 wagers, which might be parlays, second-half or first-half wagers, prop bets, you get the idea (lots of room for interpretation): The sports league may notify the commission, basically, that official league data is necessary to grade the wagers. Then the commission would review the request, seek input from the casinos, spin twice around the whiffle ball bat, and then possibly require the operator under new rules to use (e.g. purchase) the official league feed.
(7) The right to limit wagers: New York State would cede to another league request here. Here’s how it would work (page 8):
A SPORTS GOVERNING BODY MAY NOTIFY THE COMMISSION THAT IT DESIRES TO RESTRICT, LIMIT, OR EXCLUDE WAGERING ON ITS SPORTING EVENTS BY PROVIDING NOTICE IN THE FORM AND MANNER AS THE COMMISSION MAY REQUIRE.
IF THE COMMISSION DENIES A REQUEST, THE SPORTS GOVERNING BODY SHALL BE AFFORDED NOTICE AND THE RIGHT TO BE HEARD AND OFFER PROOF IN OPPOSITION TO SUCH DETERMINATION IN ACCORDANCE WITH THE REGULATIONS OF THE COMMISSION.
While this might simply mean that some leagues don’t want to allow prop bets or another kind, this also looks like a potential wholesale opt-out for the NCAA and NFL, who have expressed the most aversion to sports betting. But it will take a writing, some wrangling and possibly a hearing. This is becoming cumbersome. But we may see if the NCAA/NFL truly believe that sports betting is a scourge on their games.
(8) Who’s running the show: The holder of a license to operate a sportsbook may contract with an entity/operator (such as the variety of ones we examine here) to conduct its sports pool, handling wagers and risk management.
There’s more to the bill, which has been referred to the Senate’s Racing, Gaming and Wagering Committee, but those are the major takeaways, for now. Next it would go on to the Senate Finance Committee. We don’t know yet if the Assembly has a similar bill in the works, but it’s likely.
Meanwhile, two other New York lawmakers are pursuing a possible separate track to have sports betting legalized in New York via amendment to the New York State Constitution.
Here, based on the enacting language in the existing 2013 measure, which passed in 2013 via constitutional amendment, an additional amendment should not be necessary to implement what S 7900 sets out to do.
“New York State has historically been behind the curve in dealing with developments in the gaming world, and it has been to our detriment,” Sen. Bonacic said in a release, per ESPN’s David Purdum. “If allowed, sports betting will be a revenue enhancer for education in New York. We have the chance to ensure our sports betting statute is fully developed and addresses the needs of the state and all stakeholders so we can hit the ground running if and when we can authorize and regulate sports betting.”
So, why is this bill an overall win for the leagues? West Virginia, which faced pressure from MLB and NBA lobbying forces but probably less so because the state does not have a professional franchise, gave the leagues none of this: (a) the data control in tiers or otherwise; (b) rights of restriction or opting out (which could cut off all NCAA betting in New York, which could mean a huge loss off operate volume without college football or basketball wagers), (c) plus any sort of integrity/royalty fee (which isn’t a ton here but it’s another cost for operators).
Judging from neighbor Connecticut’s hearing on sports betting, they want to avoid any competitive disadvantage with New York in sports betting, which would impact traffic to brick-and-mortars. And Connecticut appears to have no interest in giving the leagues any restrictions or data control or any cut, which they explicitly noted was a royalty. Same for Iowa. But we’ll see if final forms of these states’ bills do include some of the league-preferred elements.
Rep. Jeffrey J. Berger: To acquiesce to your request, NV and no other state would not be subject to that fee, and we might be at a disadvantage.
Now they're discussing Wire Act! Seely says states won't be competing that way. (This ignores taxation/revenue and operate revenue)
— Sports Handle (@sports_handle) March 1, 2018
So, the Empire State would be putting itself at some disadvantage here with the fee and with more regulatory headaches and hurdles. Some proposed amendments will surely come.
This story has been updated to reflect an interpretation of the 2013 law and what S 7900 might entail procedurally.