Local Policymakers Looking To Fix Diversity Issue Among NY Online Sports Betting Operators

Written By Mike Mazzeo on March 9, 2022
NY Sports Betting Fanatics

There’s a diversity issue among New York’s online sports betting operators.

State policymakers and the Mayor’s Office of Minority and Women-owned Business Enterprises (M/WBE) have shed light on the issue, leading to a bill amendment that could pave the way for Jay-Z and Fanatics to get another shot at obtaining a license to operate in the Big Apple.

Recently, a New York State Association of Black, Puerto Rican, Hispanic & Asian Legislators panel featuring Assemb. Gary Pretlow, Assemb. Michaelle Solanges and lobbyist Kaitesi Munroe expressed disappointment over the lack of minority representation among the group of online NY sports betting licensees selected by the state’s gaming commission.

Pretlow emphasizes support for minority participation

The New York State Gaming Commission chose not to license Fanatics Sportsbook. Fanatics would’ve featured Jay-Z as vice chairman and member of its board of directors. Jay-Z has never commented on his involvement with Fanatics, which aligned itself with an ultimately unsuccessful bid with controversial operator Barstool Sports/Penn National Gaming.

Bally’s has a minority chairman in Soo Kim. Bally Bet expects to launch in NY in the first half of 2022, according to the company’s latest earnings call.

According to census.gov, NY’s population was estimated to be 19.8 million as of July 1, 2021. Black or African American, alone, represented 17.6% of the population.

“I have been pushing for minority participation from the beginning. The way that the rollout was designed by the (former) governor (Andrew Cuomo), it kind of eliminated everyone except for the big players,” Pretlow said during the panel, which was on Twitter Spaces. “Many people couldn’t afford a 51% tax on the gross gaming revenue, so what we wound up with was the larger entities in the business — FanDuel, DraftKings, Caesars, MGM, Rivers — the ones that have a strong foothold in the business.”

New bill amendment could create space for more minority inclusion

Pretlow has introduced a bill amendment in the Assembly — matched by Sen. Joe Addabbo in the Senate — that calls for the Empire State to go from nine NY online sportsbooks to no fewer than 14 by Jan. 31, 2023 (lowering the tax rate from 51% to 35%) and no fewer than 16 by Jan. 31, 2024 (decreasing the tax rate further to 25%).

The bill tasks the NYSGC with approving at least two applicants with “qualified minority representation.” That equates to “no more than six individuals qualified as members of a minority group … with a direct or indirect economic interest of at least five percent in the applicant.”

“I was actually looking to have 20-25 different skins or apps participating at a much lower tax rate, and then let the market dictate where people go,” Pretlow said. “Now the selection is rather limited.

“In the original bidders, there was only one entity that was minority controlled, and that was (Fanatics). The gaming commission that did the choosing, for whatever reason, did not pick them as an entity to participate in the New York version of mobile sports betting. I’m still looking to change that. I’ve introduced various pieces of legislation that would not only lower the tax rate but be more inclusive to more New Yorkers.”

Fanatics had plenty of support for NY sports betting license

Munroe, a principal for Cozen O’Connor Public Strategies (with a specialty in racing and wagering), also expressed hope for change.

“Gary already knows I am a huge advocate when it comes to diversity — especially in the gaming space. And more specifically in sports betting.

“So when I saw that Fanatics, and with Jay-Z’s involvement in it, I was really hoping that they were going to be given a license — especially given that a huge population of the players that are going to be betted on are people of color. So I would love for the gaming commission and the legislature to find a way so we could open back that door to include folks like Fanatics and others to be included.”

Fanatics has stayed active in New York

Fanatics had grand visions of opening its first online sportsbook in NY, where its offices are located. Under the direction of Michael Rubin, Fanatics hired former FanDuel CEO Matt King to run its sportsbook operation.

“We want to create the best sportsbook for fans everywhere,” King told PlayNY in September 2021.

But despite a recent $27 billion valuation, Fanatics hasn’t made any progress in the online sports betting space. Industry experts had linked Fanatics to a possible M&A with WynnBet, among others.

“We have the team and the capital, but there’s no [domestic] businesses at their current market value that I have any interest in buying,” Rubin told Sports Business Journal.

“We’ll grow organically and by M&A, but we’re not interested in any M&A in the US. In the US, the companies are losing so much money, they just aren’t attractive acquisition targets for us yet. Overseas, there’s much better businesses that could be interesting.”

Still, in the week following the Jan. 8 launch of online sports betting in NY, Fanatics spent $1,000 each to lobby friends of Addabbo and Pretlow on Jan. 11 and Jan. 14, respectively, according to the New York State Board of Elections public record. Fanatics has spent a total of $52,000 lobbying in New York.

One possible solution for Fanatics to get into New York: Form a Super Bid of sorts. Similar to the FanDuel and Kambi Super Bids accepted by the NYSGC.

“This stands a chance (to go through),” one industry source told PlayNY. “There’s been a lot of talk after the initial launch about how non-diverse the online sportsbooks are. And Jay-Z didn’t get his chance. This gives them a second chance to get a bite of the apple.”

Photo by AP / Richard Shotwell
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Mike Mazzeo

Mike Mazzeo is a contributing writer for PlayNY, reporting on legal sports betting in New York while covering the potential legalization of NY online casinos and poker. He previously wrote for ESPN, the New York Daily News and The Ringer, among others.

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