Evaluation: New York needs $ 500 million a 12 months from sports activities betting, so good luck with that
consequences NEW Sports betting has been a roller coaster ride for the past two weeks.
First, Governor Andrew Cuomo seemed to finally embrace mobile sports betting. Hours later, Cuomo made it clear that he was not envisioning an open, competitive market.
Instead, he requested one New HampshireMonopoly, with probably only one company doing sports betting on behalf of the state. The New York State Gaming Commission I would be launching a call for proposals to select the company for New York mobile sports betting on Cuomo’s plan.
Who could bet on sports bets in New York?
The selected NY sports betting provider was mentioned in a press release Got to have a partnership with one of the four existing licensed commercial casinos.
This immediately limits the field:
- DraftKings, along with From the lake
- FanDuel, along with Tioga Downs
- Bet365, along with Empire Resorts
- BetRiverswhose parent company operates Rivers Casino in the Schenectady
PointsBet has a second skin access agreement with Tioga Downs, but it’s unclear if this qualifies as a partnership in the eyes of the NYSGC. MGM also has plans for a big New York entry.
The rules have been clarified in the executive branch budget January 19th. This document left space for multiple operators by referring to 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 made sports betting, but they basically allow casinos to conduct their own gambling operations. That makes a lot of money for casinos, but little money for the state.
“And I’m not here to make a lot of money at casinos. I’m here to raise money for the state. So we have a different model for sports betting. “
The budget director sets high standards
His head of household Robert Mujica put more of the thinking. Mjuica said other states didn’t really make that much tax revenue from sports betting:
“For example, New Jersey, the most common example, has raised less than $ 80 million in all three years of sports betting – only $ 45 million in 12 months, compared to the billions that have been talked about .
“There are some states that have done differently when the state contracts with the private sector that does the sports betting, but the state ends up getting most of what is left after it’s all returned to the bettors.
Mujica said the difference between the NJ model and a monopoly model is state formation $ 50 million a year versus $ 500 million a year. The budget provides $ 493 million in tax revenue from mobile sports betting from FY 2025.
“So the governor is proposing it, and we’re going to push it so the state can get up to $ 500 million a year instead of $ 50 [million]”Said Mujica.
Cuomo and his staff did not provide any evidence that a closed model could generate ten times the sales of an open model.
How did it work in New Hampshire?
New Hampshire is the best comparison here and seems to be the model Cuomo has in mind.
This contract was also issued for an RFP. DraftKings ultimately won the right to a monopoly with the obligation to give 51% of revenue to the state. DraftKings suggested different revenue shares depending on how many operators were selected. 51% gave the company exclusive access.
But is Mujica right that this model can generate 10x returns for the state?
How to Compare Big Apple and Oranges
First of all, it should be noted that it is difficult to compare tax returns between states. The markets are at different levels of maturity and often tax different measures of turnover (e.g. net or gross). But we’ll do our best.
New Hampshire settled $ 293 million last year, which equates to more than $ 11 million in tax revenue. On a population of circa 1.4 Million Folks, there is $ 7.80 in taxes per capita for the year.
New Jersey has meanwhile taken $ 50 million in taxes from sports betting through November. This is $ 5.70 per person. Pennsylvania is at $ 3.70 per capita this year, although that doesn’t include the hefty ones $ 10 million License fees paid in advance.
In fact, New Hampshire makes the most money for its citizens. But it’s a long way from the 10x differential that Mujica quoted. And there is enormous potential upfront royalties on the table, as New York would see in a legislative proposal. This bill would calculate $ 12 million for each license.
Bad model for the consumer
Similarly, the single operator policy poses a number of problems for consumers that also limit the tax burden.
For starters, All serious or price sensitive bettors will continue to cross the New Jersey border for access to nearly 20 books and prices instead of one.
Also take into account bonuses. Go to DraftKings Sports betting Homepage and it promises a deposit bonus up to $ 1,000.
But there is an asterisk: “Except New Hampshire.”
Reality Bites for NY Sports Betting
This is not a blow to DraftKings; It’s just Economy 101. It is not profitable to offer attractive bonuses when a) you have no competition and b) you have to give away 51% of your sales. How many New York bettors will continue to cross the line to get bonuses from New Jersey books?
That brings us back to Mujica’s $ 500 million goal. New Hampshire fetched $ 11 million on bets of around $ 293 million. That means around 3.7% The handle is converted into tax dollars.
In order for New York to earn $ 500 million in taxes, the state must pay them $ 13.5 billion under control. For comparison, NJ ended 2021 on a handle of nearly $ 6 billion, and that includes plenty of New York area bettors.
Rest assured: the operators and state casinos will oppose the single operator model, likely with arguments similar to those outlined above. But it is unclear whether Cuomo will listen.