Following NY sports betting has been a rollercoaster ride over the last two weeks.

NY Sports Betting Regulations. NY sports betting actually dates all the way back to 2013 when voters in the state passed a referendum to expand gambling in the state. Sports betting was included in that referendum, but the state has to wait for the federal ban on sports betting to be lifted. New York does not report monthly sports betting handle, but because there is no mobile betting, the state has been passed in revenue by New Jersey, Nevada, Pennsylvania, Illinois, Indiana, Colorado and others.

New York is set to become the most-populous state yet to allow mobile sports betting under a plan proposed Wednesday by Governor Andrew Cuomo. The governor, who faces a $16 billion budget gap.

First, Gov. Andrew Cuomo appeared to finally embrace mobile sports betting. Hours later, Cuomo made clear he didn’t envision an open, competitive market.

Instead he called for a New Hampshire-style monopoly, with likely just one company running sports betting on behalf of the state. The New York State Gaming Commission would issue a request for proposals to select the company to offer mobile New York sports betting under Cuomo’s plan.

Who could run sports betting in New York?

A press release noted the selected NY sports betting operator must have a partnership with one of the four existing licensed commercial casinos.

That immediately narrows the field down to:

• DraftKings, partnered with Del Lago
• FanDuel, partnered with Tioga Downs
• Bet365, partnered with Empire Resorts
• BetRivers, whose parent company operates Rivers Casino in Schenectady

PointsBet has a second-skin access agreement with Tioga Downs, but it’s unclear whether that qualifies as a partnership in the eyes of the NYSGC. MGM has plans for a major New York entry as well.

The rules were clarified in the Executive BudgetJanuary 19. That document left some room for multiple operators by referencing the selection of a “platform or platforms.”

Monopoly money for NY sports betting

So, why a monopoly in a state of 20 million people?

As Cuomo put it:

“Many states have done sports betting but they basically allow casinos to run their own gambling operations. That makes a lot of money for casinos but it makes minimal money for the state.

Online Betting In New York

“And I’m not here to make casinos a lot of money. I’m here to raise funds for the state. So we have a different model for sports betting.”

Budget director sets lofty bar

His budget director Robert Mujica laid out more of the thinking. Mjuica said other states were not actually making that much tax revenue from sports betting:

“New Jersey, for example, which is the most commonly used example, in the entire three years of sports betting they’ve collected less than $80 million – actually only $45 million in 12 months – compared to the billions being talked about.

“There are a few states that have done it a different way where the state contracts with the private sector who runs the sportsbooks but the state ends up getting the majority of what is left over after everything is returned to the bettors.

Mujica said the difference between the NJ model and a monopoly model was the state making $50 million a year versus $500 million a year. The budget calls for $493 million in tax receipts from mobile sports betting by FY 2025.

“So the way the governor’s proposing it, and we’ll advance it, is so that the state can get up to $500 million a year instead of $50 [million],” Mujica said.

Cuomo and his staff offered no supporting evidence that a closed model can generate 10 times the revenue of an open one.

How has it worked in New Hampshire?

New Hampshire is the best comparison here and seems to be the model Cuomo has in mind.

That contract was also put out for an RFP. DraftKings ultimately won the right to a monopoly, with a commitment to give 51% of revenue to the state. DraftKings proposed varying levels of revenue share based upon how many operators were selected, with 51% giving the company exclusive access.

But is Mujica right that this model can generate 10x returns to the state?

How to compare Big Apple and oranges

Ny State Sports Betting App

First, it must be noted that it’s tricky to compare tax returns across states. The markets are at different levels of maturity and often tax different measures of revenue (net vs gross for example). But we will try our best.

New Hampshire did $293 million in handle last year which translated to more than $11 million in tax revenue. On a population of circa 1.4 million people, that’s around $7.80 in tax per capita for the year.

New Jersey meanwhile has taken $50 million in tax from sports betting through November. That’s $5.70 per person. Pennsylvania is at $3.70 per capita this year, although that doesn’t include the hefty $10 million license fees paid up front.

New York Sports Betting Law

New Hampshire is indeed making the most money for its citizens. But it’s a long way from the 10x differential that Mujica cited. And it leaves huge potential upfront license fees on the table, as New York would see in a legislative proposal. That bill would charge $12 million for each license.

Bad model for the consumer

Similarly, the single-operator policy brings a host of problems for the consumers that also limit tax take.

For starters, any serious or price-sensitive bettors will still cross the border to New Jersey to get access to close to 20 books and prices rather than one.

Consider bonuses as well. Go to the DraftKingsSportsbook homepage and it promises a deposit bonus up to $1,000.

But there’s an asterisk: “Except for New Hampshire.”

K-state Sports

Reality bites for NY sports betting

That’s not a knock on DraftKings; it’s simply economics 101. It’s not viable to offer attractive bonuses when a) you have no competition and b) you have to give away 51% of your revenue. So how many New York bettors will continue to cross the border to get bonuses from New Jersey books?

That brings us back to Mujica’s $500 million target. New Hampshire generated its $11m on around $293m in bets. That means around 3.7% of handle is converted to tax dollars.

So for New York to hit $500 million in tax, the state would need to take $13.5 billion in handle. For comparison, NJ finished 2021 at nearly $6 billion in handle, and that includes many New York-area bettors.

Ny Sports Betting News

Rest assured: operators and the state casinos will be lobbying against the single-operator model, likely with similar arguments to those laid out above. But it’s unclear whether Cuomo will be listening.