New York Gov. Andrew Cuomo announced legislation Monday that would authorize mobile sports betting, providing another indication that he’s ready to embrace a popular activity that he previously renounced.
Under the proposal, the New York State Gaming Commission will issue a request for proposals (RFP) to select and license a sports operator or platform to offer mobile sports wagering in New York. Cuomo delivered the comments Monday at his annual State of the State address, several days after rattling the market by reversing his position on mobile sports wagering. Until December, Cuomo had expressed resistance to any policy that allowed bettors to legally wager on sports outside New York’s Upstate retail casinos.
As Cuomo reverses course on legalizing mobile, Sen. Joseph Addabbo has voiced concern about a single-entity structure that in effect would give one operator a monopoly on mobile sports wagering in New York.
“I think we’re creating a monopolistic kind of setup, which I don’t think bodes well for businesses and casinos in New York,” Addabbo told Sports Handle.
Cuomo’s abrupt U-turn on sports betting comes at a time when the state is confronting a massive budget deficit. Ravaged by the COVID-19 pandemic, New York is facing an estimated shortfall of nearly $60 billion through 2022, the Wall Street Journal reported.
“At a time when New York faces a historic budget deficit due to the COVID-19 pandemic, the current online sports wagering structure incentivizes a large segment of New York residents to travel out of state to make online sports wagers or continue to patronize black markets,” Cuomo said in a statement. “New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis.”
A monopolistic system?
As part of Cuomo’s proposal, the operator or platform selected by New York must have a partnership with one of the state’s existing licensed commercial casinos. Currently, four non-tribal commercial casinos across the state offer sports betting in a retail setting: Tioga Downs Casino (FanDuel) in Tioga County, Resorts World Catskills (bet365) in Sullivan County, Rivers Casino (Rush Street Interactive) in Schenectady County, and del Lago Resort & Casino (DraftKings) in Seneca County.
ICYMI: I’m proposing legislation to authorize mobile sports wagering in NYS.
Online sports betting is a rapidly evolving market and allowing it in New York will keep revenue here at home that can help us rebuild post-COVID.#SOTS2021
— Andrew Cuomo (@NYGovCuomo) January 11, 2021
Cuomo’s proposal appears to grant exclusivity for mobile sports wagering in New York to a single operator, similar to a structure in New Hampshire, where the state lottery awarded an exclusive contract to DraftKings for online sports betting. By contrast, Addabbo and Assemblyman J. Gary Pretlow on Jan. 7 filed joint legislation, S 1183 and A 1257, that allows for up to 14 online brands to enter the New York market.
Last week, New York State Budget Director Robert Mujica suggested that New York could generate hundreds of millions of dollars in additional revenue for the state by operating a sports betting framework through the state lottery. Addabbo, chairman of the Senate Racing, Gaming, and Wagering Committee, takes issue with the governor’s proposal in its current form.
“We have an opportunity here and I don’t want to miss the opportunity, not only with the revenue, but I don’t want to miss the opportunity with jobs,” Addabbo said.
A multiple-skin structure
Jeremy Kudon, a partner at Orrick Herrington & Sutcliffe LLP, coordinates a multi-state campaign on behalf of several professional leagues, most notably Major League Baseball and the NBA, to ensure that sports betting legislation addresses the leagues’ integrity and intellectual property concerns. Kudon also counts prominent sportsbook operators such as DraftKings, FanDuel, and BetMGM among his clients.
An environment with healthy competition helps create a marketplace that’s more liquid and more innovative than the illegal market, Kudon explains. As sportsbooks continue to work feverishly to market their product, Kudon drew comparisons with the Amazon business model in describing how operators have prioritized attaining market share over delivering profits in the near-term.
“The problem with the single source is that there is just no competition,” Kudon told Sports Handle. “The experiment that is the United States and capitalism has always been about competition – create the best possible environment both for revenue and for the best possible product.”
Under a revenue-sharing system in New Hampshire, DraftKings is giving 51% of gross gaming revenue (GGR) to the state from its mobile channel for exclusivity of the market. Alternatively, if New York allows multiple operators to offer mobile sports betting, the percentage of an operator’s GGR being sent to the state could be considerably lower, according to several industry experts. Since New York’s fiscal year budget is not due until April 1, negotiations could become intense in the coming weeks, sources say.
Mujica estimates that New York could generate around $500 million annually from a lottery model for sports betting, compared with about $50 million from a system with the framework used by neighboring New Jersey. Kudon disagrees, citing the disincentives a single operator will have from marketing its product under a monopolistic system.
“I don’t see how a single operator can ever get there,” Kudon added. “You won’t have anywhere near the advertisements. You’re going to have a company that’s basically giving the state 51 cents of every dollar, on top of all of the other spending — it’s just not going to have a competitive product.”
Addabbo, meanwhile, indicated that it would be a credit to the governor if he backed a proposal that opened the market to other stakeholders, namely the professional sports leagues that are headquartered in New York. The plan divides the pie more equitably among pro sports venues, racetracks, and off-track betting sites, all of which are included in Addabbo’s bill, the senator emphasized.
“I know the end game is about making money for the state. I think long-term we will make more with a different setup,” Addabbo told Sports Handle. “I think the single-entity kind of structure becomes monopolistic.”
*New York Sports Betting Bill Calls For Competitive Market, Not Single Operator
• Contrary to initial reports of a state lottery sports betting system in New York, the bill filed in the New York Senate today calls for a competitive market with up to 14 sportsbook apps.
— Roundhill Investments (@roundhill) January 8, 2021
Addabbo is unsure whether Senate Majority Leader Andrea Stewart-Cousins is in favor of the single-entity framework.
While estimates vary, nearly 20% of New Jersey’s sports wagering revenue comes from New York residents, Cuomo’s office said in the statement.
Full details of Cuomo’s proposal will be part of the state’s Executive Budget, which will be proposed no later than Jan. 19, New York State Gaming Commission spokesperson Brad Maione wrote in an email to Sports Handle.
Addabbo plans on meeting with Mujica before the budget is proposed later this month, he told Sports Handle.