New York casinos don’t want more skin(s) in the game if the Empire State legalizes online sports betting.
Assemblyman Gary Pretlow tells PlayNY that New York’s four commercial casinos and three gaming tribes are lobbying for the state to limit them to a single skin.
While the single-skin issue has been in play previously, it wasn’t clear that support of it was nearly unanimous among the state’s casino interests. One operator — Tioga Downs — that has two different sports betting partners also supports the single-skin model.
If the New York legislature opts to restrict the casinos and tribes to one sports betting brand operating under the casino’s master license, it would cost the state in excess of $100 million over the first year, Pretlow said he believes. This at a time New York faces a $14 billion budget deficit.
“It was surprising to have the casinos come out against having multiple skins,” Pretlow said. “I think they’re being shortsighted. I think multiple skins would be beneficial to the casinos as well as the state, and my obligation is more to the state than the casinos.”
Pretlow, who sponsors legislation to legalize online sports betting in New York, is advocating for at least two skins. The language of the bill in the Assembly and Senate currently only allows for one.
Single skin will cost New York money
Similar to most states, New York is considering a model in which online sports betting operators can only operate in the state if partnered with land-based casinos or Indian gaming tribes.
Each additional skin filled would bring New York $12 million in licensing fees under the current legislation. More sports betting operators also would bring more marketing spend. That would likely provide some boost to the size of the market and more tax revenue.
Each New York commercial casino and tribe already has its main partner. Eventually, New York will add three more casinos downstate.
- Tioga Downs – FanDuel Sportsbook
- del Lago – DraftKings Sportsbook
- Rivers – In-house
- Resorts World Catskills – bet365
- Mohawk – FOX Bet
- Oneida – Caesars Entertainment/William Hill
- Seneca – In-house
That means major players such as Penn National Gaming, PointsBet, and BetMGM would be kept out of the market initially. PointsBet and Penn National are lobbying lawmakers to allow for an additional skin. (MGM could have a path to a full casino license via its Empire City Casino in Yonkers, and in turn sports betting.)
Pretlow said he is advocating for a second skin but might push for a third.
“My biggest selling point is the $84 million. If we make it three skins, that’s $168 million. Those skins will sell immediately. We could auction them off and get more than $12 million each. And we could absolutely use that money. We’re cutting aid to hospitals and education, and laying off municipal workers.”
Casino owner would cut out second partner
Jeff Gural owns Tioga Downs Casino Resort in New York and Meadowlands Racetrack in New Jersey.
In the Garden State, which allows three skins each for a total of 42 possible apps, Tioga has two strong sports betting brand partners in FanDuel and PointsBet.
For Rush Street Interactive, which owns Rivers Casino and will go with its own BetRivers sports betting brand, it’s obvious why it wouldn’t want multiple skins. It doesn’t want a sports betting partner and likely gets a valuation boost when it goes public if New York legalizes online sports betting with a single skin.
But even Gural would rather limit the New York market to a single skin when that means leaving out partner PointsBet. His first partner, FanDuel, is the market leader in New Jersey.
Gural told PlayNY:
“From what I see in New Jersey, only a few are profitable. So to me, that model makes no sense. We believe it makes the most sense to limit it. Although I like PointsBet, having 10 companies seems to be the way to go.”
Why casinos would limit NY online sports betting market
Multiple skins means additional sports betting partners bringing money to the casinos in market access agreements that include revenue share. This is why casinos lobbied in favor of multiple skins when New Jersey legalized sports betting in 2018.
In lobbying for a single skin, New York casinos are potentially decreasing revenues from sports betting. However, more opportunities for companies to enter the New York sports betting market means those companies can negotiate better arrangements with casinos.
“For casino operators, the calculation is complicated because they are balancing if they can get a premium on a skin in limited supply versus if they can sell multiple skins to bring in more money,” said Chris Grove, an analyst for Eilers & Krejcik Gaming. “I think the math is not clear. Since it’s not a slam dunk, operators perceive the simpler and existing partners as preferable.”
A study of the multiple brand markets in New Jersey conducted last year by Eilers & Krejcik on behalf of iDEA Growth noted this about market share disruption:
While greater parity may be in the best interest of the state, altering the market share status quo is only of interest to those operators who gain from the disruption. A multiple-skin model certainly has the potential to bring greater benefits to some operators than others, especially operators who are on the minority side of market share.
A bird in the hand …
By limiting the market to one skin with the partners already picked out, casinos know where they stand and have a measure of control over the market.
“For some reason, casinos think they’re going to have to share with someone else and they don’t want to do that,” Pretlow said. “I don’t think they see the big picture with more skins that they can broaden outreach and get more people involved because different people prefer to play on different venues.”
It comes down to casinos being risk-averse. By lobbying for a single skin, they are indicating that they like their place in the projected market. They don’t want to see what’s behind door number two by allowing competitors a second partner.
“I could see why casinos would not be big fans of allowing more operators in,” said a representative of one sports betting operator. “Someone will be left with less money. If more skins generate additional revenue, it generates more revenue for the state but for the casinos someone is missing out. That is an opportunity for revenue that six casinos aren’t getting.”
Could multiple skins be a constitutionality concern?
New York voters approved sports betting at seven casinos in a 2013 constitutional amendment allowing for casinos in the state.
Whether or not that approval extends to online sports betting has been debated in New York for the past two years. By not pursuing a constitutional amendment for online wagering this session, lawmakers seem to have decided that it does.
But did they approve the state having 14 sports betting apps or even 21? Some sources who discussed the topic with PlayNY wondered if there could be a legal challenge if more sports betting operators are allowed in the state than the number of casinos allowed by voters.
Pretlow doesn’t believe there would be a constitutional problem with having multiple skins.
“That’s like saying we can’t have more than eight slot machines in a casino,” Pretlow said. “There’s no constitutional issues there at all. The constitution allows for casinos, and sports betting is a casino operation.”
Skin argument to continue as NY legalization talks heat up
Pretlow previously told PlayNY that he has a commitment from Assembly leadership to include online sports betting in an upcoming revenue bill. That ignited a renewed lobbying effort on particulars of the language.
Casino lobbying has created resistance to multiple skins in the Senate, where sponsor Sen. Joseph Addabbo Jr. has said he favors a single skin. Pretlow said he plans to talk with Addabbo on the matter.
Pretlow indicated that he had not heard from sports betting operators lobbying for a single skin, although he noted that they may be influencing their casino partners to do so. Competition from more sports betting sites likely increases their customer cost.
NY lawmakers expected to do a revenue bill to address expected shortfalls due to the economic downturn in September. But they are waiting for Congress to pass a coronavirus stimulus bill to see how much federal aid, if any, the state receives.
Congress is making a last-ditch effort to reach an agreement on a stimulus package prior to the November elections. Pretlow said lawmakers are currently in discussion on when to do the revenue bill given the federal delays.
“I think we’re running out of time to wait on the feds,” he said. “If the government wants to do the stimulus package after the election, we may have to do the revenue bill sooner than that.”