NY Sports Betting Regulator Reveals What A Platform Provider And Operator Actually Are

Posted on April 26, 2021
NY sports betting

The New York State Gaming Commission clarified how mobile NY sports betting will shake out, though there are still some questions.

The NYSGC answered select questions from the industry now that sports betting in New York is finally going mobile. The answers are definitely helpful but do not go into all the necessary details yet. That means some of the confusion around the legislative language will continue for now.

The problem with the proposed model for mobile betting in New York is no one really understands it. Gov. Andrew Cuomo stuck to his plan and pushed his model through, which calls for at least two platform providers and four operators.

Hopeful participants and bettors wanting to know more will be waiting for the request for proposals to drop for full details. That will happen by July 1 at the latest. The first draft of mobile betting regulations is expected the same day as the RFP.

Answering bigger mobile NY sports betting questions

The biggest question to date is what exactly a platform provider and operator will do, and what their relationship must entail.

The NYSGC gave the clearest answer yet of the necessary relationship:

“Operators must utilize the platform for the acceptance and processing of wagers. Utilization of technology beyond the required wagering transaction processing will be at the discretion of a platform provider.”

Another question needled deeper into the issue, asking if operators under the same platform provider can use different technology:

“Yes, required utilization of a platform is limited to those functions necessary to accept and process a wager. Further utilization is subject to agreement between a platform provider and an operator.”

How that could function

In essence, a sportsbook operator could partner with someone that does not provide all of their technology as long as the sportsbook routes its bets through the platform provider. What exactly that would look like will likely be further described by the RFP.

Taking another step back, the commission defined what a platform provider itself is:

The operators (skins) will be consumer facing. A platform is the back-of-house system accepting and recording transactions initiated through the skin applications.

Mobile NY sports betting tax payments murky

The commission did not completely clear up how the state of New York will get its money. Remember: Cuomo’s office expects more than $500 million in annual sports betting revenue within three years.

The tax rate –  a minimum of 50%, as dictated by Cuomo – will be paid by platform providers. The winning bid with the highest proposed rate will set the bar. Other providers with a winning bid will have to adjust their bid to include the higher rate to win a license.

But platform providers are not guaranteed to get whatever that rate is from their partners:

“Distribution of internal revenue is subject to agreement between a platform provider and an operator.”

The proposed economics do not sound great for anyone other than the state of New York to profit from mobile betting.

More operators after RFP?

One of the biggest concerns for Assemblyman Gary Pretlow throughout the negotiations was being stuck with an NY sports betting market that is not generating the most possible revenue for the state. He wanted a review period included, but that didn’t make the final bill.

Based on how the regulator reads the bill, this RFP is the only chance to get into New York.

Adding future operators as the market matures is not possible under the commission’s interpretation of the law.

Original partnerships confirmed pointless

So much for the four sportsbooks that negotiated first-skin access in New York.

Bet365, BetRivers, DraftKings Sportsbook and FanDuel Sportsbook all have first-skin deals with one of the four commercial casinos in New York. At first, Cuomo’s proposed model made it sound like that mattered. Now it’s clear those deals are worthless:

“Contracts between commercial casinos and operators of their in-house sports wagering will have no relevance to the RFA. The RFA is open to all qualified platform providers and operators, and awards will be made to the highest scoring applicants.”

Extra points for tribal revenue share, not for skin

The system to score the RFP is still unknown and will stay that way until the RFP is released, the commission said. The one item about scoring that is known is a platform provider that partners with one of the state’s three tribal gaming operators will get extra points.

That doesn’t mean the tribal operator needs a skin, though:

Q: Must an operator partner with a Native American Nation or their operator simply reach a revenue share agreement with a Nation to receive additional points?

A: An operator that has a revenue share agreement with compacted Nation(s) or Tribe(s) will receive additional point consideration when its bid is scored.

Concerns over the Oneida Indians‘ exclusivity zones likely led to tribal inclusion getting more points. Yet the document makes clear the state’s interpretation that sports betting cannot occur on tribal lands or within those exclusivity zones. A legal challenge on that matter remains possible.

Other important mobile NY sports betting details

A few other questions were answered or clarified that help explain mobile NY sports betting:

  • Platform providers cannot pick where their servers are kept – that decision is made by the commission. All four commercial casinos will get servers and will get $5 million annually no matter what. How many platform providers are chosen will dictate how those payments are made.
  • Platform providers can partner up for bids, but both would be on the hook for a $25 million license fee.
  • Two platform providers is the minimum but it does not sound likely it will wind up that way: “After reviewing all proposals, the Commission will determine the optimum number of licenses to award that will maximize revenue to the State.”
  • A company can apply to be a platform provider in one bid and an operator in another. Should one of those bids win, the other bid would have to be re-scored without that company.
  • Free play and promotions cannot be deducted from sports betting revenue to lower tax burdens.
  • If a platform provider’s bid includes multiple operators, those operators do not all have to launch at the same time. The bid must include a timeline for the launches, though.
  • Preference for official league data will be detailed in the regulations. Whether cash can be deposited at retail locations will also be decided in the regulations.
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Matthew Waters

Matthew Waters is a reporter covering legal sports betting and the gambling industry. Previous stops include Fantini Research and various freelance jobs covering professional and amateur sports in Delaware and the Philadelphia area.

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