April 3, 2019

The Update Desk: Sports Betting

Back in January, I did a quick recap of what New York's Sonofa Gov Andrew Cuomo had on his State of the State wish list, which included sports betting. He can wish for that now, because the Supreme Court ruled that all states could dip their toes into this gambling stream, which previously was a Nevada exclusive.

Since that update, the state's Gaming Commission has issued draft rules, and we're a couple of weeks into a 60-day comment period on them. Among other things, the proposed rules would allow only in-person betting, and
The state rules also prohibit betting on college sports taking place within New York state, or on any events in which a New York college team plays, regardless of location. 
Regardless of the limitations, there's a bit of excitement with some members of the Legislature, including Assemblyman Angelo Santabarbara, who's on the Assembly's Racing and Wagering Committee. Take a look.
Allowing sports betting in our upstate casinos brings sports betting out of the shadows and at a benefit to the taxpayers. It levels the playing field so we can create a responsible market for sports betting in  safe regulated manner...Upstate New York is home to four gaming resorts, including Rivers Casino here in Schenectady that would benefit immensely from legalized sports betting, giving our region another boost. The additional revenue to the state makes it a win-win. 
We have those upstate casinos, you'll recall, because we were literally hemorrhaging gamblers to neighboring states, according to the Sonofa Gov. And that of course is also happening now, as New Jersey and Pennsylvania are both up and running with sports betting already, and Connecticut and Massachusetts are getting close.

And I have to ask myself if we've learned anything at all since we approved gambling back in 2013.

So, right off the bat, what are those revenue projections, anyway?

$10M, maybe $30M, according to a study - although there's lot of pressure to allow online betting, with DraftKings suggesting the state could get $100M in new tax revenue. And, of course, the racinos and OTB folks also think they should be allowed to get in on the fun, so that would mean even more money for the state, right?

Not so fast - at least, not so fast, if we look at what's happening in other states. Check out this headline:
Sports Betting Revenue Not Delivering Forecasted Tax Benefit, Four States Say Sportsbooks Underperforming
Say it ain't so! Can it be that we're going to go down the same path with sports betting as we did with our new casinos?
Legalized sports betting is now operational in eight states, but officials in four of the markets where the liberalized gambling began last year say revenues are falling short of pre-market forecasts. An Associated Press review finds that sports betting gross gaming revenues in Rhode Island, Pennsylvania, West Virginia and Mississippi are failing to meet projections. 

How short are revenues falling? In West Virginia about 75%. In Pennsylvania and Mississippi, about 50%, and in Rhode Island, where there was an anticipated $1,000,000 per month to be had, it's been around $50,000 a month. At least they can blame the Patriots for winning the Super Bowl, I guess.  Things are a little better in New Jersey, where after a little less than half a year, the state took in $10.4M against a full-year projection of $25M.

One thing that's different in Jersey? Mobile betting is allowed - and is taxed at 13%, vs. only 8.5% for 'land-based' betting. Notably 80% of the bets placed in the first two months of 2019 were processed online, not in person. And remember, NY is not looking to have a mobile option, some of the money-losing states are looking at that, to try and shore up revenue.

Interestingly, there's been no drop-off in revenue in Vegas, even as other states come on line.

We've been down this path before, in New York: gambling is going to save us, we're going to be making money hand over fist, we were told. That has not happened, at any of our casinos. and there's no reason to think that it will happen with sports betting, either.

In fact, I think it would be much more honest if legislators were to project that it will be a money-losing proposition; that way, they'll be able to claim a small victory when all is said and done if we take in a few bucks, even a few million bucks.

More importantly, they need to designate that all of the money raised from this new venture be lock-boxed for the state's rainy day fund, and not used to meet any spending needs - real or imagined.

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