Mobile sports betting Andrew Cuomo style By Ken Adams, CDC Gaming Reports April 11, 2021 at 8:19 pm New York has just passed its budget for the next fiscal year. It is a tidy sum, $212 billion, a 10 percent increase over the 2020-2021. Blame it on COVID-19. Like the rest of the country, New York is faced with an economic crisis in the wake of the pandemic. The crisis has created a mountain of social needs and concerns, which the budget seeks to address. Struggling communities, schools, small businesses, renters, landlords, homeowners, undocumented immigrants, unemployed and underemployed workers are among those the budget seeks to help. The cost of the needs exceeds the state’s previous revenues. To solve the problem, Governor Andrew Cuomo has proposed some cuts to state services, including reducing the number of prison and mental-health beds and services. Cuomo also proposes increasing revenue with some tax increases and mobile sports betting. The governor had previous opposed mobile sports betting, but in January, he changed his mind and pushed to have it added to the budget legislation. However, Cuomo wants it on his terms; he expressly said he does not want to enrich the casino operator. His sole intent is to enrich the state treasury. The budget anticipates $500 million in revenue to New York from mobile sports. That is a lot of money, and probably not easily achieved. In 2020, New Jersey produced $398.5 million in sports win and collected $46.8 million in taxes. The New Jersey tax rate is 13 percent of win. The $500 million New York wants is more than any state has thus far generated in mobile gaming win and many times what any state has collected in taxes on sports betting. Recognizing the difficulty in collecting $500 million by normal tax rates, the lawmakers simply upped their take: The state wants at least 50 percent of the win. New York is willing to share the other 50 percent with a sports betting platform provider – of which there might be two. The providers can then have four skins, and therefore share their 50 percent with the skins and various other people. Besides sharing, the provider will pay all of the marketing, payroll and other expenses related to operating a business. In a rare moment of reasonableness, the law requires the sports betting licensee to pay only $25 million for the license. The New York Gaming Commission will be responsible for seeking and vetting platform providers, then choosing one or two to receive a license. The would-be providers have to explain to regulators why they should be chosen, why their bid is better than others and how much tax they are willing to pay, with 50 percent being the minimum. Of course, the winning bidders have to demonstrate a track record of integrity, the experience to perform financially and the ability to meet five other conditions. The timelines in the legislation are tight and the final selection is to be made by January 2022. Part of the criteria in choosing the platform provider is the capacity to deliver the product very quickly upon receiving the license. The lawmakers want people in New York making bets on the next Super Bowl. The mobile betting portion of the budget legislation has drawn very little praise. Jeff Gural of Meadowlands in New Jersey thanked Cuomo for the gift; Meadowlands depends on New York gamblers. It generated $206.4 million in sports revenue in 2020, 51 percent of the state’s total. Gural said he was sorry that Cuomo would not be around to see the total failure of the plan. The Oneida Nation of New York was not so subtle. The tribe said the plan violated the tribal-state compact of 2013. Oneida and the state’s tribes must feel like they have been manipulated by a snake-oil salesman. Cuomo is the author of that 2013 tribal-state compact. At the time, Cuomo was pushing to expand gaming in New York; he needed money for his budget and gaming seemed like the ideal place to get it. The tribes resisted, saying they had an exclusive agreement with the state. Cuomo went on a tour of the tribes and sweet-talked the tribal leaders. Oneida agreed not to fight the casino expansion — as long as they retained an exclusive right to operate gaming withing a ten-county region. In the minds of the Oneida leaders, the new mobile betting would be a direct violation of that exclusivity. The tribe is evaluating its options, one of which would be to withhold the payments it is currently making to the state. If the tribes withheld their payments, New York would lose half of the $500 million right off the top. Ah, but not to worry, as a spokesperson for the governor spokesman had an answer. The governor’s office is of the legal opinion that bets would be determined by the location of the platform provider’s server, not the location of the bettor. Perfect. If the server is not in Oneida territory, it does not violate the agreement, regardless of where the actual gambler may be standing when placing the bet. It is a very complicated situation. The legislation is vague and convoluted. It will take some time to sort things out. The lawmakers think they can continue to make adjustments and compromises as they go along. Unfortunately, they did not put that into the legislation. Instead, the law put the Gaming Commission in the driver’s seat. DraftKings and FanDuel will be prime candidates, but Wynn, Caesars, Penn and MGM will probably at least consider it. Oneida and William Hill are already partners, and that might be an option. There is also a wildcard, the New York Lottery. The Lottery might actually be Cuomo’s first choice. If nothing else, the governor of New York has proven he has a style all his own.