Could Legalized Online Sports Betting Help Dig NY Out Of Its $13 Billion Hole?

Posted on August 7, 2020 - Last Updated on August 24, 2020

Professional sports are back, and states with legal sports betting have begun to see action once again. However, when it comes to online sports betting, New York remains on the sideline.

The state currently faces a $13 billion budget shortfall. Consequently, many are wondering what legalizing online sports betting could do to help the state.

Sports betting misses the mark for this year

This week, a key legislation deadline passed for sports betting, which all but ensures online sports betting will not be coming to New York this year. Or perhaps next year, either.

In New York, a favorable vote on a constitutional referendum is required to authorize online sports betting. As of now, the earliest date by which the state’s lawmakers could approve such a referendum is 2023.

With online sports betting legal in multiple neighboring states, New Yorkers are continuing to travel across state lines in order to place their sports wagers.

How much online sports betting revenue is New York losing to nearby states? A lot, according to a study conducted in 2019.

New Yorkers travel to New Jersey for mobile sports betting

DraftKings and FanDuel funded the study, conducted by the gaming research firm Eilers & Krejcik Gaming.

Researchers particularly examined how much online sports betting revenue New York is losing to New Jersey. The study estimated New York residents accounted for just over 18% of total money bet on mobile sportsbooks in New Jersey in 2019.

Of the $4.58 billion in sports wagers placed in New Jersey, the study found New York residents bet approximately $837 million.

The study also analyzed different scenarios by which New York online sports betting could be legalized. The scenarios were then compared to see which best maximized revenue for the state, while also reducing illegal wagering, including betting on offshore sportsbooks.

Of the three scenarios, one involving a low tax rate and many operators was the most promising. That scenario yielded an estimated $166 million in annual tax revenue for New York.

Each of the scenarios projected a minimum of $119 million in annual tax revenue for the state.

Interestingly, study authors Chris Grove and Chris Krafcik identified a high frequency of New Jersey online sportsbook logins from Hoboken. A major transportation hub, the Jersey city is located just across the Hudson River from New York.

The high number of logins relative to other locations confirmed the likelihood of New York residents making the trip to New Jersey to place online sports wagers.

“The willingness of so many New Yorkers to engage in such travel despite the availability of illegal betting options… strongly suggests that New York consumers are clamoring for a legal, safe alternative,” wrote Grove and Krafcik.

Cuomo insists constitutional amendment needed first

As noted, however, such a legal alternative does not appear to be arriving soon for New York sports bettors.

Debates over the current law and the prospects of new legislation all determine how quickly online sports betting comes to the state.

Some lawmakers believe the 2013 law allowing retail sportsbooks in the state’s four commercial casinos also covers mobile sports betting. However, Gov. Andrew Cuomo disagrees, and believes any gambling expansion requires a change to the state’s constitution, including the introduction of online sportsbooks.

Lawmakers could still try to pass legislation to legalize online sports betting. However, given the governor’s stance regarding the need for a constitutional amendment, Cuomo could potentially veto any such legislation.

Budgetary woes, casino closures impact online betting debate

Of course, the coronavirus pandemic has created a unique set of circumstances. The unprecedented situation could well affect the debate surrounding online sports betting in New York.

The state’s commercial casinos have remained shuttered since Gov. Cuomo ordered their closure on March 16. Last week Cuomo reiterated his intention to keep the casinos closed.

“It’s an issue of density, the likelihood of compliance and the essential nature of the business,” said Cuomo during a conference call with reporters. Thus retail sportsbooks are not an option for New York sports bettors currently.

Meanwhile the ongoing COVID-19 pandemic has had a significantly negative impact on New York’s budget.

In late June, Gov. Cuomo announced that without additional federal aid, the state would have to withhold 20% of the aid it typically provides to cities.

The state’s budget originally allotted $370 million in aid to 12 cities. However, the state revised that figure to a little under $300 million. Federal aid could help fill the gap, but there is no guarantee the money will come.

That’s just one of several budgetary headaches New York faces at present. Most pressingly, the state faces a $13 billion budgetary shortfall for the next fiscal year.

With a revised budget coming soon, online sports betting proponents like Senator Joseph Addabbo, Jr. and others will continue to advance their case. The potential tax revenue from online sports betting could help fill the deficit being faced by schools, hospitals and cities.

Legalizing online sports betting sooner than later certainly won’t solve all of New York’s pressing problems. But the added revenue could help the state in certain areas by recovering tax revenue currently going to New Jersey and elsewhere.

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