New York Governor Andrew Cuomo’s proposal for a lottery-style sports-betting concession will cause consternation among potential operators.
There was good and bad to be had from the news yesterday that Gov. Andrew Cuomo had changed his mind on online sports betting in New York.
Yes, this would potentially open up the most populous state so far to online sports betting.
As one of the big four – California, Florida and Texas being the others – New York has perhaps the best chance seeing online sports betting regulated any time soon.
However, the caveat is that Cuomo mentioned a form of licensing that would be akin to the lottery.
That is, a single concession to be run by one company in conjunction with the state.
That concessionaire would be one of the existing casinos in the state.
Rough with the smooth
No wonder, then, the news caused the leading gaming stocks to jack-knife.
DraftKings, for instance, rose from $44.25 on Monday to $51.08 on the initial news yesterday.
However, in afternoon trading it fell back to $48.64 as the news sunk in with regard to the concession model.
At heart, the debate regarding the model is about how best to channel consumer interest into tax dollars.
Sara Slane from Slane Advisory suggested yesterday that opening up online sports betting could “generate significant revenue for state coffers.”
However, Cuomo’s office pointed to the open licensing model as practiced by New Jersey saying it has raised only $80m for the state in less than three years.
Instead, Cuomo believes a more direct single licensing operation could raise $500m in annual state tax revenues.
Barry Jonas, analyst with Truist Securities, said a lottery-operated model “might not be competitive to neighboring state offerings” or the black market.
A single-concession online market would also harm the gaming friendliness of New York as measured by the Wedge Index.
Points are awarded to a state’s tally according to the number of competitors. To have one would be severely limiting.
The next steps would appear to be a request for proposals (RFP) process by which an operator and/or a platform would be chosen.
It is unclear at this point whether the licensee would necessarily have to be a current retail license holder.
If this were the case, it would mean the licensing would be a straight fight between four contestants:
- DraftKings at Del Lago Casino
- FanDuel at Tioga Downs
- Rush Street Gaming at Rivers Schenectady
- Bet365 at Resorts World Catskills
MGM also has a VLT slot facility at Empire City. However, it does not currently have retail sports betting.
The operator potentially best-positioned would be DraftKings, which runs a sportsbook under similar conditions in conjunction with the New Hampshire lottery.
The model unlikely to be followed would be Washington D.C. where sports-betting is run by the lottery in conjunction with Intralot.
John Pappas, lobbyist with CorridorDC, said the proposals went against anything so far discussed by the legislature.
Although at this stage it is hard to see whether it goes against the state’s constitution, a legal case might ensue.
“On the surface, the commercial and tribal casinos who are left on the side-lines, would have a strong legal argument against and non-competitive mobile market,” he says.
“Especially since they are already authorized to offer retail betting.”
Papas added that the proposals did nothing to address the issue of leakage across state borders.
“Those players will not simply abandon the loyalty they have built up with those operators to start playing on the only available mobile site in New York, just because it is there.”
According to Jonas, another downside from New York pursuing the single concessionaire strategy is that it might set an example for other states.
“Another bearish risk is that NY’s move could increase the prospects of other states looking for a bigger piece of the pie,” he said.
“We keep our sports betting forecasts and company estimates intact for now, awaiting more details later this month.”
The next news from new York could come as soon as next week when Gov. Cuomo delivers his state of the state address.
A budget proposal then has to be submitted before January 19th.
Said Pappas: “I think we need to see what is actually proposed by the Governor and respond accordingly.”
“Revenue is obviously driving this, and there are ways to get more revenue for New York without settling for a misguided monopoly.”