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Sports Betting: The Next Major Market
After long-held opposition to mobile sports betting within New York State, Governor Andrew Cuomo has changed his mind — but what do the economics say?
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Friends,
After watching New Jersey set a national record for the most money bet on sports in a month for the fourth consecutive month in November — a monthly total of more than $930 million — New York State Governor Andrew Cuomo appears to be stepping up to the plate.
In an apparent reversal of a long-held opposition to mobile sports betting within New York State, Governor Cuomo announced yesterday that he has changed his mind — now planning to present mobile sports betting in his 2021 policy proposal for the state.
After seeing New Jersey generate almost $1 billion in sports bets in November, New York Governor Andrew Cuomo is finally giving in.
“By legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home."
(H/T @NYDailyNews)
— Joe Pompliano (@JoePompliano)
1:40 PM • Jan 6, 2021
Furthermore, here is what Governor Andrew Cuomo told the New York Daily News:
"New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis.”
But given his opposition to mobile sports betting in the past, the real question becomes:
Why now?
Let’s run through it.
First, some history.
The United States Supreme Court repealed the Professional and Amateur Sports Protection Act (PASPA) in 2018, which paved the way for states to self-regulate retail and online sports betting.
Less than a month later, New Jersey signed Assembly Bill 4111 — effectively legalizing sports betting moving forward.
The result?
Massive success.
In 2019 alone, New Jersey saw roughly $4.6 billion in wagers and revenues of nearly $300 million, resulting in $36 million in tax revenues.
The craziest part?
With more than $5 billion wagered in the first 11 months of 2020, last year was even bigger.
Keep in mind, that’s with no March Madness and four months with no major professional or college sports.
Simply put, New Jersey has become the sports betting capital of the United States — a title Las Vegas never thought they would lose.
Next up, New York.
With a population of almost 20 million, New York wouldn’t instantly become the largest state to legalize sports betting.
The interesting part?
New Yorkers are already doing it. The state just isn’t receiving any of the tax revenue.
Check this out…
In February of 2020, an Eilers & Krejcik Gaming report estimated that New Yorkers wagered over $800 million in New Jersey during 2019, indicating they control about 20% of the state’s total handle.
If that percentage held in 2020, that would mean New Yorkers wagered more than $1 billion on sports in New Jersey — without the state of New York receiving a dime of the tax revenue.
🤯🤯🤯
Outside of clear financial upside and the ultimate inevitability of the industry expanding, the main reason New York is willing to change course on mobile sports betting is obvious.
Due to the impact of COVID-19 on the economy, New York expects state-wide revenue could fall by as much as $15 billion — a massive increase from the previous $7 billion estimate they provided earlier this summer.
In the simplest of terms, they could use the money.
While it’s easy to get caught up in the excitement of the industry potentially expanding to a market of nearly 20 million residents, should we get our hopes up?
Later in the day, Governor Cuomo indicated that he wants the state lottery to run sports betting — rather than casinos.
Here’s the quote:
“We want to do sports betting the way the state runs the lottery where the state gets the revenues. Many states have done sports betting but they basically allow casinos to run their own gambling operations. That makes a lot of money for casinos but it makes minimal money for the state.”
“And I’m not here to make casinos a lot of money. I’m here to raise funds for the state. So we have a different model for sports betting.”
My take?
It’s a horrible idea.
Not only would it take years to push through given required changes to the New York State Constitution, but we’ve seen firsthand how bad the lottery strategy has worked in places like Washington, DC.
As Darren Rovell of the Action Network puts it, “A lottery model means only one sportsbook would operate, leading to less competition, worse pricing for consumers and little to no innovation.”
Only time will tell if Governor Cuomo will change his mind on the logistics of the rollout, but progress is progress — we’ll take what we can get.
Have a great day, and we’ll talk tomorrow!
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