Cuomo’s Online Sports Betting Proposal Could Doom New York Casinos

New York Sen. Joseph Addabbo Jr. has been dreaming of the day that Gov. Andrew Cuomo embraced bringing online sports betting to the Empire State.

When he woke up Wednesday to find that day had arrived, something told him not to get too excited yet.

Sure enough, later in a press conference, Cuomo revealed that he plans to ignore the work Addabbo has done on the issue over two years and introduce his own proposal.

And that proposal would task the New York State Gaming Commission (NYSGC) with selecting a single operator to offer mobile sports wagering in New York.

Addabbo, who along with Assemblyman Gary Pretlow put together an inclusive model for online sports betting, couldn’t believe it. With New York casinos needing a lifeline after a year of closures, layoffs, restrictions, and added costs as a result of the pandemic, the governor was throwing them an anvil.

“I’ve encouraged all in the industry you’ve got to call the governor and say we’ll close – we’re done,” Addabbo said. “If that’s the case, they need to make it clear that if we do mobile sports betting and don’t include them, they’re done.”

Casinos could close without online sports betting

In 2013, New York voters approved a constitutional amendment authorizing New York casinos. It also permitted them to have sports betting if allowed under federal law.

The first four commercial casinos opened upstate in 2016 and 2017 as part of an economic development plan for the region. But they underperformed expectations. Closures related to COVID-19 made circumstances even direr, forcing casinos to lay off 4,000 employees.

The casinos began offering retail sports betting in July 2019, but that has been little help. People in New York City find it more convenient to cross into New Jersey to place a bet than head upstate.

The prospect of online sports betting promised to bridge that gap and give New York casinos a boost. Addabbo sees it as reinvesting in the industry to produce more jobs and tax revenue for the state.

“Casinos have been hurting because of the pandemic,” Addabbo said. “This is a way for them to keep the doors open, recoup some of those jobs, help their local municipality. If you do mobile sports betting and don’t include them, I’d hate to see what happens. I’m fearful for those workers trying to provide for themselves and their families.”

Jeff Gural, owner of Tioga Downs, would not yet commit to pledging to close the casino but told playin-ny he was shocked by the proposal.

“I am optimistic that we will be able to come up with a plan that works.”

Details of Cuomo’s online sports betting proposal

Much remains unclear about Cuomo’s online sports betting proposal.

“In typical governor fashion, he plays everything close to the vest,” Addabbo said. “I guess he will roll out some details Monday and then we’ll start the process of negotiating.”

Here’s what we think we know:

• The governor’s press release indicates the NYSGC would issue a request for proposals to select a sports operator or platform to offer mobile sports wagering.
• This operator or platform must have a partnership with one of the existing commercial casinos.
• The executive budget released no later than Jan. 19 will include the full proposal.

Cuomo made clear that he wants the state to control online sports betting, not the casinos:

“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.”

“I could not find anyone today to say this proposal has merit, this proposal has a chance to succeed or this proposal is a step forward,” Addabbo said. “I could not find one person in the industry who thinks this is a good move for New York State.”

Why Cuomo’s proposal poses problems

For two years, lawmakers have tried to convince the governor that legalizing online wagering does not require a constitutional amendment.

Although Cuomo said he wanted to “do sports betting the way the state runs the lottery,” that doesn’t necessarily mean he wants it to go through the New York Lottery.

If he did, that would ironically bring back the constitutionality concerns that previously plagued the issue. In 1984, then-New York Attorney General Robert Abrams issued a formal opinion that it would require a constitutional amendment for the lottery to “conduct a game in which bets are placed on the outcome of pro sports events.”

The 2013 amendment changed the constitution to permit casinos to offer sports betting, but not the lottery.

So how could NY online sports betting work?

The governor’s press release specifies that the mobile sports betting operator chosen by the NYSGC have a partnership with a commercial casino.

That could be to host the server at that casino, fulfilling the constitutionality obligation that sports betting in New York is only legal at casinos.

But that sets up a situation where only New York casino makes money off of online sports betting. A monopoly isn’t likely to set up the best scenario for revenue or consumers.

“To have all these wagers accommodated by one server or entity, I have concerns with that,” Addabbo said. “I like to be inclusive. Our deal includes racetracks, arenas and stadiums, casinos, and even the Native Americans because their servers had to be on our land or geofenced out. I don’t think we’ll be able to handle that volume, so it will encourage people to go to New Jersey or Pennsylvania or Connecticut or do it illegally.”

If one casino can do it, the others could challenge in court that they should be allowed to as well. And if one casino can offer online sports betting, does that trigger the reciprocity rule allowing tribal casinos to offer the same games as their commercial counterparts?

“I agree we should maximize the revenue but comparing sports betting to the lottery is apples and oranges,” Gural said. “Hopefully we can explain why the lottery model will fail and come up with a plan that works for the state and the casinos and sports betting operators.”

Clarity could come with State of the State address

There are a lot of unanswered questions about the governor’s online sports betting proposal.

He may provide more details Monday in his State of the State address. He would then put the entirety of his proposal in the executive budget.

Budget negotiations are a long undertaking of discussions between the governor, Senate, and Assembly that go on until April 1. That provides plenty of time for lawmakers and industry representatives to discuss the details of online sports betting with Cuomo.

“There are industry people who really question this proposal by the governor on so many levels,” Addabbo said. “They are all looking for hope, for this opportunity to get back on their feet, and they needed a governor to have their back. There’s still time, but I think we took a couple steps backward today.”