In Competing Proposals for New York Mobile Sports Betting, the Winner is Clear

By: Ifrah Law

Today, New Yorkers who want to place a legal mobile sports wager need to drive to neighboring New Jersey or Pennsylvania.  Otherwise, unless residents of the Big Apple and the rest of the state want to wager with an illegal offshore operator or local bookmaker, New Yorkers remain out of luck these days.  However, the annual state budget negotiations have provided a window of opportunity for New York—one of the country’s most populous state—to join the growing list of states to legalize mobile sports wagering.

Right now, the state of New York is in budget negotiations which, in large part, involves the work of a select few government officials behind closed doors. Eventually, likely early next week, the budget will be presented to the state legislature for consideration prior to being sent to Governor Cuomo for signature. The big questions are whether the budget will contain a provision legalizing mobile sports wagering and, if so, what format mobile sports wagering in New York could look like.

Last month, a group of lawmakers in New York proposed a competitive model for mobile sports wagering which accounted for the interests of a variety of stakeholders, including the state’s commercial casinos, tribal casinos, video lottery terminal operators, and sports teams and leagues.  This model would allow, among other things, for the state’s commercial and tribal casino operators to partner with sports wagering operators to offer a variety of “skins” in which mobile sports wagering would be available to consumers, in a model that would resemble that of New Jersey or Pennsylvania.  This model would allow for competition between a variety of operators, which would present a wide array of offering and attractive odds to consumers.  Based on the experience of New York’s neighbors such as New Jersey and Pennsylvania, New York would realize significant tax revenues under this proposal.

By contrast to the model proposed by legislators, it is believed that Governor Andrew Cuomo supports a less competitive marketplace in which New York’s state lottery would partner with and share revenues with a single operator (or potentially two operators), which would be selected via a competitive bidding process.  This model would more closely resemble the mobile sports wagering system in New Hampshire, in which the state lottery has an exclusive partnership with DraftKings.  Other states such as Delaware, Oregon, and the District of Columbia also have single-operator sports wagering systems affiliated with the state lotteries.  Although these lottery-centric models allow for states to grab a larger percentage share of the revenue, based on the experience in those states, a single-operator setup would almost certainly see less competitive offerings for consumers, leading to reduced consumer participation in the legal market, and, resultingly, lower net revenues to the state.

This afternoon, Jeff Ifrah, the founder and general counsel of the iDevelopment and Economic Association (iDEA)—a trade association comprised of stakeholders in the online gaming industry—issued a statement voicing iDEA’s support of the model supported by the legislature, citing a study conducted by Spectrum Gaming that identified that model as the best choice.  “Spectrum Gaming concluded that a competitive environment that allowed consumers a choice would also build out the most robust industry – and tax base – for the state of New York,” Ifrah said, in reference to the legislative proposal.  “On behalf of iDEA growth and its dozens of members of the gaming industry, we urge Governor Cuomo and the New York State legislature to enact legislation to ensure the creation of a competitive, regulated, sports betting market that will work for consumers, the New York state economy and bolster ailing New York state tax revenues.”

Although the ultimate result is not yet known, there is speculation that if mobile sports wagering were to find its way into the upcoming budget, Governor Cuomo’s single-operator proposal would be the one likely to win the day.  Not only would this scenario shut out tribal casino operators in New York, but it would also lead to less competitive offerings that would likely lead to New York consumers not shifting away from illegal operators, or continuing to drive across the border to New Jersey or Pennsylvania to wager in those states’ more attractive markets.  Although many industry advocates remain hopeful that the competitive model proposed by the legislature wins the day in the upcoming budget, those who are less optimistic believe that a better result with the upcoming budget would be to keep mobile sports wagering out entirely—and seek to reintroduce the competitive model at a later date—than to enact Governor Cuomo’s single operator proposal.