While online sports betting seems like a lock to hit the New York market, lawmakers haven’t yet decided on the operational model for legal mobile wagering.
New York State Legislature and Gov. Andrew Cuomo stand at odds on how to operate New York’s mobile sports betting industry. Both the State Assembly and Senate proposed bills in the FY 2021-22 budget that would allow New York’s seven land-based casinos to license and operate online sportsbooks.
Each casino could license up to two online sports betting skins under the Assembly and Senate proposals, bringing a potential maximum of 14 different online sportsbooks to the Empire State. Gov. Cuomo advocates a lottery-operated sports betting model, and he’s sticking to that outline, according to Buffalo News Albany Bureau Chief Tom Precious.
Precious announced in a Wednesday Twitter post that a source revealed that Cuomo is committed to the lottery-based operating model. Precious posted that Cuomo’s plan would involve one vendor and four skins.
The text from Precious’ tweet reads as follows:
“Wed mobile sports update (source): @NYGovCuomo digging in on plan for a lottery-style system, w/ 1 statewide vendor & 4 mobile operators, or skins. Legis wants 2 skins apiece for 7 NYS in NYS. Wrapped up in NYS budget talks that are far from resolved. This wk, next wk, who knows?” posted Precious.
Potential Effects Of A Lottery-Operated Sports Betting Model
The “Legis” outline for 14 total skins offers the maximum revenue opportunity for New York’s mobile sports betting industry. NY Sports Day projects that with 14 skins, online sports betting could produce $1.3 billion in annual revenue.
Taxed at a proposed 12%, those earnings would yield $156 million in annual tax revenue for the state. The State Assembly bill also proposes a one-time $12 million licensing fee for all operators, and 14 skins would produce an additional $168 million in revenue for the state.
Gov. Cuomo’s lottery-based model could hamper mobile sports betting revenue significantly. With only four skins allowed, Gov. Cuomo’s model would shut several of sports betting biggest brand’s out of the lucrative New York market.
NY Sports Day projects that a lottery-operated business model with four skins could reduce potential earnings to $650 in annual mobile sports betting revenue. This projection considers the success of other states that host flourishing sports betting markets under a casino-operating model.
Neighboring New Jersey, for instance, plays home to the nation’s undisputed No. 1 sports betting market. Mobile sports wagering produced $359.4 million in revenue for New Jersey in 2020, with all Atlantic City casinos eligible to license multiple sports betting skins.
The New Jersey market includes brands like FanDuel, DraftKings, William Hill, BetRivers, BetMGM, PointsBet, FOX Bet, and several others. With more than 20 skins, New Jersey proves the viability of a competitive mobile sports betting market.
Retail sports betting is already legal in New York, with DraftKings, FanDuel, BetRivers, and bet365 operating land-based sportsbooks. Those brands would stand as the most likely operators to land mobile licenses under Gov. Cuomo’s proposal.
Limited to only four operators, Gov. Cuomo’s sports betting model would exclude many of the brands, along with the marketing machines behind them. Cuomo has stated that his approach would result in more revenue going directly to the state, but a limited number of skins could significantly limit the long-term potential of New York’s sports betting market.
The $650 million revenue projection would yield $78 million in annual tax earnings. The state would also lose out on $120 million in licensing fees if the maximum number of skins was reduced from 14 to four.
Our projection also assumes a 12% tax rate and $12 million licensing fee for each skin. Gov. Cuomo could increase both under his proposed model, making up for revenue losses in both areas.