If New York state leaders hope to include mobile sports betting into the state’s Fiscal Year 2022 budget, negotiations will have to go into overtime.
A midnight deadline passed without a completed budget by Thursday morning, leaving industry stakeholders on pins and needles. The possible legalization of online sports wagering in New York represents an inflection point for the emerging industry. When Gov. Andrew Cuomo indicated in January that mobile sports betting might be used as a mechanism for curbing a historic budget deficit, the three-term governor noted that New York could eventually become the largest marketplace in the nation.
Negotiations among the governor’s office, the state Senate, and the state Assembly remained fluid on Wednesday evening, Sen. Joseph Addabbo Jr. told Sports Handle. Key items on the negotiating table include a breakdown of revenues between the state and sportsbook operators, as well as the number of mobile skins or sports betting licenses allowed in the market.
Negotiators for Cuomo’s team had yet to reject the legislative proposal as of 6 p.m. ET Wednesday, according to Addabbo.
“As long as that happens, we remain optimistic,” Addabbo told Sports Handle.
The negotiating table
Cuomo sent shockwaves throughout the industry in January with his abrupt U-turn on mobile sports betting, an activity he previously dismissed or denounced. At the time, Cuomo proposed a public-private partnership under which the New York State Gaming Commission would issue a request for proposals (RFP) to select an operator or operators to offer online sports wagering in the state. Cuomo’s proposal differs starkly from Addabbo’s bill, S 1183, which calls for the issuance of up to 14 skins statewide.
Cuomo projects that the New York market, at maturity, would bring $500 million to the state per year in annual revenue. For Year 1, a partial year, mobile sports betting is projected to generate revenue of $49 million, before a proposed step-up to $357 million by Fiscal Year 2023. The state is not projected to bring in $500 million in any of the next three fiscal years. When asked Wednesday to describe the sticking points in the sports betting negotiations, a spokesperson from the New York Division of the Budget only confirmed that budget negotiations are “ongoing.”
Cuomo’s model has drawn comparisons to one in New Hampshire where the state lottery awarded DraftKings an exclusive contract for online sports betting. As part of the revenue-sharing system in the Granite State, DraftKings is paying the state 51% of its gross gaming revenue (GGR) from its mobile channel. Cuomo is looking for a percentage similar to that of the New Hampshire agreement, a source with knowledge of the negotiations told Sports Handle. If New York opts to go with a state-run model, it has not been determined if the state plans to open the mobile sports betting market to more than one commercial partner.
In neighboring New Jersey, bettors wagered a smidge over $6 billion on sports in 2020. When using population data as a tool for comparison, New York Assemblyman J. Gary Pretlow argues that the Empire State could more than double New Jersey’s average monthly handle. New Jersey books generated about $393 million in GGR last year on a hold of 6.6%.
As such, the New York handle may need to eclipse $15 billion in some years for the state to hit Cuomo’s projections. It is estimated that about 20% of New Jersey’s customer base for legal sports betting comes from bettors who reside in New York.
A spokesperson for Cuomo did not immediately respond to a request from Sports Handle to comment.
| Categories | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 |
|---|---|---|---|---|---|---|
| Handle | $20 Billion | $20 Billion | $15 Billion | $15 Billion | $10 Billion | $10 Billion |
| Hold Percentage | 6% | 5% | 6% | 5% | 6% | 5% |
| GGR Rev Share | 51% | 51% | 51% | 51% | 51% | 51% |
| Revenue To NY | $612 Million | $510 Million | $459 Million | $382.5 Million | $306 Million | $255 Million |
A trial run?
As negotiations intensified this week, Addabbo’s staff floated a hybrid model that he believes could be a compromise between the disparate proposals. Under the model, the state would still enter into a revenue-sharing agreement with mobile operators, but the plan would broaden the market to other entities such as racetracks and professional sports venues. With millions of dollars at stake, Addabbo credited his staff for their flexibility in devising an inclusive model under high-pressure negotiations.
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
Addabbo is also in favor of orchestrating a trial run for sports betting, in which the New York market would go live in September in time for the opening week of the NFL season. The trial period would last several months through the NFL playoffs, culminating in the Super Bowl. By then, the data available would provide a “tell-tale sign,” he noted, on whether Cuomo’s model is effective or if it needs to be re-evaluated.
On Wednesday, multiple media outlets reported that a budget would not be passed on time. Addabbo hinted that while negotiations could extend into next week, the delay could be necessary with so much at stake. The state still needs to close a budget gap of about $2 billion, sources said Wednesday evening. While the Senate passed a debt service bill late Wednesday night, the legislature had still yet to pass fewer than half of the 10 bills that make up the budget.
Hours before Thursday’s deadline, Addabbo gave mobile sports betting about a 50/50 chance of receiving inclusion in the budget.
