New York is opening its lucrative mobile sports betting market, but gambling companies looking to operate in the state may have to pay a high premium for this privilege.
State officials filed an application for applications from sports betting companies earlier this month, whose proposals are due by August 9. DraftKings Inc.
and the FanDuel Group, the dominant companies in the online betting industry, are expected to file applications with the New York State Gaming Commission in the coming weeks.
Jason Robins, Chief Executive of DraftKings, told a Goldman Sachs conference in June that the company is “excited and hopeful that we will be making a very competitive offer and being selected as one of the few operators in New York.” FanDuel spokesman Cory Fox said the company is excited about the opportunity to offer its services in New York and has read the application requests carefully.
The state estimates that mobile betting will ultimately generate $ 482 million in annual tax revenue from a sports betting market of roughly $ 1 billion. But New York doesn’t make it easy for gambling companies, according to people familiar with the state’s plans. Businesses must offer the state to pay at least 50% of their earnings, which some say could reach 60-65% if they were competitive.
New York state budget director Robert Mujica, a tax advisor to Governor Andrew Cuomo, said the state expects key industry players to apply. “New York is a huge market,” said Mujica. “One way or another, the vendors will participate, so we think they will do their best.”
After several years of deliberation, Mr. Cuomo and New York State lawmakers agreed to legalize online sports betting as part of the state budget passed in April. Legislators pushed for a model similar to that in New Jersey, in which casinos would partner with mobile betting companies. A tax rate would have been set by law.
Instead, the state will select at least two platform providers to deliver the technology and four operators to deliver the consumer-facing brands. The New York Gambling Commission rates licensees based on an applicant’s track record and plans, as well as what a tax rate they are willing to pay.
New York officials said they are basing their plan on the New Hampshire system, where state lottery bets were collected and DraftKings launched in late 2019 as the only mobile operator betting, after taking into account ad spending. The state received $ 13.3 million in mobile sports betting revenue between July 2020 and June this year. after the lottery.
At a pivotal moment for the U.S. gaming industry in 2018, the Supreme Court paved the way for states outside of Nevada to legalize sports betting. Meanwhile, 31 states and the District of Columbia have legalized sports betting, although not all states allow mobile betting.
Daniel Wallach, an attorney who advises gambling companies, said he expected bidders in New York could offer up to 60% of their earnings after the bets won were paid out to the state.
SHARE YOUR THOUGHTS
What are your prospects for mobile sports betting? Join the conversation below.
“It would be the highest revenue sharing model for mobile sports betting in the US,” he said.
Bill Pascrell III, a lobbyist representing a group seeking licenses in New York, said the state is making a significant mistake in limiting the number of sports betting providers.
“They’ll probably find out why they want to retrofit it a year or so after it’s launched, and they’ll want to retrofit it because of what happened in New Jersey,” said Mr. Pascrell, whose father is a member of Congress who serves northern New Jersey represents.
In comparison, there are more entities in the Garden State, each paying much lower tax rates to the state. More than a dozen companies offer digital sports betting at a 13% tax rate, according to the state’s Department of Gambling Enforcement website. Last year, Players in New Jersey wagered $ 5.5 billion via online sports, amid pandemic casino shutdowns and $ 487 million in person. Total sports betting revenue this year was nearly $ 399 million, an increase of about 33% over the previous year; Online casino sales were $ 970 million, double that of the previous year.
FanDuel and DraftKings recently made arrangements with Connecticut’s two tribal casinos to conduct online wagering. FanDuel has partnered with Mohegan Gaming & Entertainment, the owners of the Mohegan Sun tribal casino, while DraftKings has partnered with Foxwoods Resort, owned by the Mashantucket Pequot tribe.
Under an agreement with the Tribes, Connecticut set a tax rate of 13.75% on sports betting income and a tax rate of 18% on the first five years of online casino gambling, such as: B. Betting on slot machines and roulette games on mobile phones. This tax rate will increase to 20% for the next five years. The state’s amended tribal treaties, which set out the gambling agreements, have yet to be approved by federal regulators.
Meanwhile, Connecticut Lottery is seeking its own partner to run online sports betting for the state. Lottery officials are in contract negotiations with a company following a competitive application process. The lottery did not publicly identify the companies during the ongoing selection process.
Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8