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Perhaps the only true question was not if but “how much”? That being the realistic and true potential for sports wagering and online gambling involving the New York market.
A long-awaited New York research study reports that through mobile and retail sports betting the state could generate $332m to $406m in its first year. Spectrum Gaming Group expects this to increase significantly over the following years, to a maximum of $1.14bn in the sixth year.
These numbers by Spectrum were based on an annual gross gaming revenue (GGR) of $50 to $70 per adult across the US. As New York’s median household income is slightly higher than average, Spectrum increased its per-adult revenue estimate to between $53 and $74 for New York.
The report will have an impact upon decisions soon as the state moves forward with its plans upon New York sports betting and online gaming progress. The key factor is choosing two distinctly different models.
Governor Cuomo has confidence in a state-run lottery model while many members of the NY state legislature favor a casino-based option.
The commission first requested the study in September 2019 and planned to publish the results three months later. Several delays caused to publishing the 345-page report last week. Spectrum Gaming Group conducted an extensive analysis with the aim of forecasting the impact of changes to New York’s gaming market.
While the effects of COVID-19 continue to plague New York, the potential for necessary ancillary revenue has become more urgent. Under the Spectrum report, the gaming industry will return to the pre-pandemic level by 2023. Should online sports betting become legal between now and that date, that timeframe could become much shorter, representing a quicker recovery for New York gaming revenue.
Besieged by the coronavirus, New York’s budget shortfall is expected to total nearly $60 billion over the next two years. In his State of the State address in early January, Cuomo said that he will no longer block the sector’s expansion onto New Yorkers’ phones and laptops.
Currently, all legal bets in NY must be placed in person at one of the upstate casinos. Cuomo acknowledged in a recent statement, the system “incentivizes a large segment of New York residents to travel out of state to make online sports wagers or continue to patronize black markets.” That was the major catalyst for moving forward.
He was referring to sports bettors traveling to bordering New Jersey, the US #1 sports wagering market by handle and revenue, where 14 licensed mobile sportsbooks operate. A common habit is for many is traveling into New Jersey to be within the state’s legal geolocation signal.
Estimates vary on the contributions by New York bettors to New Jersey’s revenue, but overall New Jersey led the nation by winning $398.5 million in 2020. Members of the Cuomo administration have judged about 20% of that total comes from New York.
A press release detailed the highlights of the report:
With respect to mobile sports betting, Spectrum indicates that stabilization of revenue will occur three to five years after commencement. Analysis concludes that at a 10 percent tax rate, retail and mobile sports wagering would generate between $72 million to $104 million in tax revenue to the State.
The key to these estimates “assumes that the tribal sports wagering operators will NOT be able to generate meaningful market share”. Whatever option New York chooses, the assumption could prove to be very inaccurate.
Two very well-known legislators long associated with this agenda, Senator Joseph Addabbo Jr. and Assemblyman Gary Pretlow target the casino-focused bill. Whereby, tribal operators would be able to partner with major sports wagering operators and obtain a large share of the NY market.
These legislators prefer an open market and trying to pass two bills that would set up an open market. Sen. Addabbo Jr and Assemblyman Pretlow proposed the legislation on January 7. If passed, bills S1183 and A1257 would allow the state’s gaming commission to issue a request for proposal, after which it could select multiple providers.
The Senate voted both bills out of committee last week, which either indicates a preference for Cuomo’s selection or an opportunity to re-work these bills toward more support.
The obvious downside to Cuomo’s choice is several top sportsbook operators would be shut out. Under his option, mobile sports betting licenses or licenses would be bid between the four commercial casinos’ retail partners. That would be restrictive and leave at most four legal sportsbooks to choose from, which currently include DraftKings Sportsbook, FanDuel, BetRivers and bet365.
It is not evident yet how much the long-delayed study will have upon Governor Cuomo’s thinking nor the path for the debate. The positive for many is Cuomo is now solidly reinforced to pursue legalized online wagering while being so opposed to it for several years.
Compared to adjusting tax rates or licensing fees, the total model structure cannot be changed or compromised. A complete decision must be made. Many hope the governor takes the advice given in the exhaustive study accomplished by Spectrum and validates its investment. The most important aspect is any decision must be made soon for the benefit of people in New York.
Larry Gibbs is both a seasoned journalist and a respected online gaming industry consultant. His wry commentary & sharp analysis have appeared in numerous top gaming and sports wagering publications. He has also served as Vice President of US Gaming Services, a marketing research organization with 15 years of experience in US online wagering. He has spoken at noted gaming industry conferences including G2E, GiGSE, and NCLGS.
Email: [email protected]
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