The effort to add iGaming to NY sports betting officially started Wednesday in Albany.
Although FanDuel and DraftKings have not gained any traction in their efforts to reduce the 51% tax rate on online NY sports betting, the Empire State’s biggest operators could benefit from being able to supplement their New York sports betting offerings with a potentially more lucrative online casino business.
Sen. Joe Addabbo’s iGaming bill, S4856, features a 30.5% tax rate.
NY sports betting providers would add casino
Addabbo said during a joint hearing that NY loses “roughly $4 billion” every year it doesn’t legalize iGaming.
All nine NY online sports betting operators would be granted a license to conduct online casino gaming.
“Sports betting companies have hit a brick wall in their efforts to reduce New York’s tax rate,” a source close to bill negotiations told LSR. “Since the iGaming bill automatically gives every licensed sports operator an iGaming license, FanDuel and DraftKings get a lifeline by dramatically increasing their revenue in New York at a lower tax rate.
“So while they may quibble on some of the details, you can expect a strong push from sports operators for the iGaming bill.”
NY online casino bill faces challenges
Still, the bill faces an uphill battle. It did not make it into Gov. Kathy Hochul’s executive budget proposal for FY2024,
Even Addabbo recently acknowledged, “It’s not a good sign.”
Regardless, even if next year is more likely, advocates will continue to make a strong push for its passage now.
“The iGaming bill would raise in the neighborhood of $800 million in revenue for the state,” Light & Wonder global head of gaming affairs Howard Glaser told LSR. “This should be much more palatable to the legislature than the tax increases, like the commuter tax or the corporate franchise tax, that were proposed in the Governor’s budget.
“We are still in the early innings of the budget process, and it’s likely that the more they look at it, the more the legislature will find iGaming revenue to be an attractive alternative. And the thousands of jobs produced by iGaming live dealer — which under the bill would be union jobs — will give a further boost to prospects.”
NY sports betting tax reduction issue
The first full year of legal online sports betting in NY generated more than $16 billion in tax revenue and over $700 million in tax revenue.
Yet despite negotiating and agreeing to the 51% tax rate, executives including DraftKings CEO Jason Robins and FanDuel president Christian Genetski pushed this year for a reduction.
Robins said DraftKings might be “forced” to offer worse odds and lesser promotions for customers if a change is not made.
Skeptical legislators, however, didn’t seem to be swayed. Hochul even seemingly upped the ante by projecting nearly $900 million in tax revenue for FY2024.
FanDuel, DraftKings want iGaming
The addition of iGaming would give operators a better chance in their respective paths to profitability.
Robins said during his hearing testimony:
“As you heard from Spectrum, their projections show the legal iGaming market here in New York would generate $2.3 to $3.1 billion in GGR in year one and $3.6 to $4.3 billion in GGR in year five.
“Results have shown that iGaming’s success can come without cannibalizing existing retail gaming operators or the lottery, and certainly without experiencing the hyperbolic, doomsday scenarios that many opponents recklessly predict.”
NY iGaming bill breakdown
The major components of Addabbo’s iGaming bill include:
- Tax rate: 30.5% (including promotional deductions)
- Initial licensing fee: $2 million ($10 million if renting under your own brand from another licensee)
- Regulator: NYS Gaming Commission
- Skins: One per license
- License term: 10 years
- Games: slots, table games, live dealer
- Live Dealer: Studios must be in-state
- Responsible Gaming Funding: $11 million
- Commercial Casinos: four upstate, three downstate
- Tribes: Seneca, Oneida, Mohawk
- Racinos: Includes MGM Empire City and Resorts World NYC (both could become full casinos)
- Existing Online Sports Betting Operators: FanDuel, DraftKings, Caesars, BetMGM, PointsBet, BetRivers, WynnBet, Bally Bet
- Three Competitively Bid Licenses For Online Entities With Minority Participation: This provide a pathway to Fanatics, which wasn’t granted an online sports betting license, to enter the market.
Importance of responsible gaming
Addabbo repeatedly cited the importance of responsible gaming in the legalization process.
“With iGaming, probably our biggest challenge — bigger than the downstate licenses, bigger than mobile sports betting — is the challenge of addiction with iGaming. I think it’s trickier, and therefore we’ll look to do more funds and more in-tune with OASAS (the Office of Addiction Services and Support) on how we address addiction even further,” Addabbo told LSR.
Illegal operators would be banned
The bill also includes an eye-opening provision that would prohibit operators who offer online casino gaming in terror states and illegal markets from NY licensure.
It potentially could cause some entities to chose between regulated markets and unregulated markets.
“Between the proposed New York and New Hampshire prohibitions on licensing illegal offshore operators, and Entain’s recent pullout from unregulated markets, the days of Wild West operators being allowed in US states are coming to a close,” an industry observer told LSR.
NY gaming expansion continues
There are six states that offer legal online casino gaming. Addabbo previously expressed frustration with the Empire State being unable to gain traction.
New York is in the process of awarding up to three downstate casino licenses. A $455 million renovation plan of Belmont Park made it into the Governor’s executive budget proposal. There also is the tax rate issue, though a middle ground that could see promotional deductions appears unlikely at the moment.
What else might appear around NY sports betting?
Addabbo and counterpart Assemblyman Gary Pretlow have also talked about increasing sports betting markets to include awards and drafts. They also refiled their bills on kiosks and fixed odds horse racing. In addition, Pretlow has introduced a poker bill.
“Between the money lost to the illegal markets; between the money lost to New Jersey, Pennsylvania and Connecticut, because you know New Yorkers are participating in iGaming; and you can’t help them addiction-wise. Because if you don’t regulate it, you don’t know who they are.
“If that’s what you want to give up, because you don’t want to do iGaming this year, so that it starts maybe this year or the following year, so be it.”