After years of work, the final push for mobile sports betting is finally here. With the state budget due on April 1st, it’s expected that the state budget will include mobile sports betting in New York for the first time. As we chronicled with New York State Senator and Chairman of the Committee on Racing, Gaming and Wagering Joseph Addabbo Jr. last fall, there are benefits to passing mobile sports betting for all New York state residents, not just those who like to wager on sports.
Senator Addabbo discussed the benefit of passing the Senate’s bill, S2509B, to help job creation in the state, the health and safety of residents allowing residents to stay within state lines, and of course the tax revenue from the casinos. The Senate and the Assembly passed similar bills that call for two “skins” (licenses to offer mobile sports betting) for each of the currently 7 licensed casinos in New York State. (The Senate bill also calls for expediting 3 additional licenses for downstate casinos but it was not included in the Assembly proposal for reasons the Chairman of the Assembly Committee on Racing and Wagering, Gary Pretlow, explained here.)
Governor Andrew Cuomo’s proposed sports betting model includes the New York State Gaming Commission selecting one or more operators through a competitive bidding process. New Hampshire went this route and had operators bid against one another and had the ultimate winner, DraftKings, pay the nation’s highest tax rate on revenue. The high tax rate then trickles down to the consumers where the sportsbook is not able to offer the best odds that may be available in states with lower tax rates. On top of the higher tax rate, the lack of competition lowers the incentives for sportsbooks to offer the best odds possible for bettors to focus on making money for the casinos.
Governor Cuomo’s proposal anticipates it can earn New York $500 million in annual tax revenue at full maturity, (within 3-5 years after passing the bill) but that assumes there will be full bettor participation. As Gaming attorney Daniel Wallach said “To look at New Hampshire as a model for New York just doesn’t make sense given the landmass and the population size of New York, and New York’s mix of gaming stakeholders of racetracks, casinos, video lottery terminal operators and OTB’s (off-track betting facilities).” With a high tax rate and no competition, it is difficult to imagine there will be enough of an incentive for New York state residents to change their behaviors from betting in other states or betting illegally.
This proposal is contrary to the Senate and Assembly’s bill that has stakeholder support from casinos, race tracks, leagues, teams and their arenas, and also bettors. The Senate and Assembly bill attempts to provide New York residents with up to 14 providers for bettors to choose from and get the best odds. Both bills estimate each licensing fee to offer mobile sports betting would cost $12 million to provide the chance for $168 million in fees in 2021. Those licensing fees would be a one time windfall, but the bills propose a 12% tax rate on all mobile bets in the state. A study done by Spectrum Gaming Group forecasted the annual gross gaming revenues for expanded sports betting to be approximately $1 billion. Using the Senate and Assembly bill’s 12% tax, that would lead to a potential $120 million increase annually in tax revenue.
As the Senate and Assembly bill currently stands, 85% of that tax revenue would get directed to the Commercial Gaming Revenue Fund, 5% to assisting and preventing gambling addiction, and the remaining 10% split between regulation costs and market origin credits pursuant to Section 115-B. The Commercial Gaming Revenue Fund, otherwise known as Section 97-NNNN, directs 80% of funds to elementary and secondary education or real property tax relief, followed by 10% to the host municipality and the host county of such facilities, and the last 10% among counties within the region for the purpose of real property tax relief and for education assistance.
With negotiations heating up, New York State Assemblymember Monica Wallace is pushing to direct 5% of state tax revenue towards funding youth sports and recreation grants. These grants would particularly help the organizations serving low income communities through sports-based youth development (SBYD) programs.
Proponents of this proposal point to the benefits youth sports have on the community at large. In a letter addressed to Governor Cuomo, Speaker Heastie, and Majority Leader Steward-Cousins, Youth Sports Collaborative Network (YSCN) states that physically active youth are at lower risk of health issues like obesity and depression. It also asserts that youth sports help children develop critical life skills, such as social emotional learning, pro-social relationship skills, and better academic performance.
These positions are supported by Assemblymember Wallace and New York City Schools Chancellor Miesha Porter. Porter is quoted in the letter mentioned above saying: “Sports in particular provide a much-needed outlet for our kids and they have been without that for nearly a year at this point. By having important opportunities and offerings like sports that are driven by student interests, we can expect to see students more engaged and excelling in academics.” Wallace was quoted in an article in the Buffalo News saying, “[k]ids who play sports also live healthier lives, which would reduce obesity and save millions in health care costs,” … “Investing just a small portion of the mobile sports betting proceeds could be transformational in the lives of an entire generation of children and young people.”
The COVID-19 pandemic has had dramatic impact on youth sports participation. According to a the Aspen Institutes State of Play 2020 survey, adolescent athletes ages 6-18 have spent nearly 6.5 hours less per week playing sports during the pandemic. There is also data showing that the impact has disproportionally affected under-resourced communities. The same survey indicates “[c]hildren living in a household making $100,000 or more spend more than two hours additional time on sports each week during the pandemic than a child in a home under $50,000. That gap was less than one hour before COVID-19.” Likewise, YSCN’s recent nationwide survey revealed that youth sports programs serving under-resourced communities have seen an 84% reduction in regular participation due to the pandemic.
Advocates of this proposal believe this is the perfect opportunity to ensure a return to play that is “safe, supportive, flexible, and frequent.” With the April 1st budget deadline rapidly approaching, New Yorkers will soon find out if mobile sports betting will be legal, and if so, how the proceeds will be used.