Higher tax rate called big loser
Lawmakers criticize Cuomo’s setup for mobile sports betting
Key lawmakers here Tuesday bashed outgoing Gov. Andrew M. Cuomo’s handling of New York’s entrance into the mobile sports betting field, saying he sought unrealistic tax rates that could end up hurting the industry in its infancy.
They wanted a lower tax rate that would draw more entrants into the field. Others said the application and bidding process was needlessly complex.
“It was heaven and hell,” Democratic Westchester Assemblyman Gary Pretlow said. “What Joe and I did was heaven,” he said referring to Queens Democratic Sen. Joseph Addabbo, his counterpart who heads that chamber’s gaming committee.
Cuomo’s plan, which prevailed when lawmakers finally agreed to move forward in April,
Pretlow suggested, is the hell.
A key difference, said Pretlow and Addabbo, was the suggested tax rate on the betting handle, or amount wagered, by those who make sports bets on their phones. Pretlow said lawmakers wanted to collect 12 percent rate, and they believed that mobile sports betting could bring in $350 million per year at that rate.
Cuomo, though, was looking for a 50 percent tax rate, estimating that could net $500 million for the state.
“They never once showed us how they came to that number,” said Pretlow.
As it turns out, the bidding process is now set up so applicants who agree to pay a tax of 50 percent or higher have an almost insurmountable advantage in the competition to get a license.
Pretlow and Addabbo say they worry the tax rate is so high it could end up hurting in the long run. They pointed to New Hampshire, which has a 51 percent tax rate, and which made no money during the Super Bowl last winter.
New York’s bidding system is a hybrid in which “two or more” betting operators can be selected based on their projected ability to bring revenue to the state. Those operators will in turn contract with “skins” or vendors that interface with bettors such as Fanduel or Draft Kings.
The operators also have to agree to work with existing casinos, possibly by placing their computer servers on their premises.
There are other complications.
Pat Brown, a top lawyer in New York’s gaming field, described the “complicated, cumbersome’’ process by which betting firms have to bid to the state Gaming Commission.
These remarks came during a gaming conference at the Saratoga Race Course attended by dozens
of gaming executives from across the nation.
With the bids now coming in to New York, the state Gaming Commission is scheduled to get oral presentations from the applicants starting in September. They hope to be started and running by Super Bowl LVI on Feb. 13.
“We have to be up and running by the Super Bowl. That is the moneymaker,” said Addabbo.
At least eight other states offer mobile sports betting, where smartphone apps can be used to place bets on sporting contests. Others noted that New York was coming late to that game, again because of an initial reluctance by Cuomo.
The doors for mobile sports betting opened in 2018 when the U.S. Supreme Court ruled that states can authorize sports betting. The case centered on New Jersey, which quickly issued sports betting licenses and licenses for mobile betting.
But Cuomo had expressed doubts about the constitutionality of sports betting in New York, due to language in the state constitution. The Legislature in 2019 ended up allowing sports wagering, but by then other states, including neighboring New Jersey, had a head start.
Several of Tuesday’s speakers expressed fears that New Yorkers who now drive to New Jersey to make mobile bets, or those who use offshore internet providers, may continue to do so, if the state’s tax rate is so high that vendors can’t offer customers in the Empire State a full menu of promotions as well as good odds.
“Sports bettors look for the slightest edge,” said Pretlow.
“We are playing catchup,” said Addabbo.
One good bet, said participants, was that Cuomo’s pending departure — he steps down next week — shouldn’t slow the process of issuing licenses. Officials at the state Gaming Commission remain in place and the process is
already under way.