New York will consider the legalization of online casino gaming this year.
A new bill, introduced by Sen. Joseph Addabbo, appeared in the Senate on Thursday. It was immediately referred to the Committee of Racing, Gaming and Wagering.
Addabbo is sole sponsor of SB 8412. He was also instrumental in the state’s efforts to bring sports betting online, which came to fruition on Jan 8 this year.
Close to two months in, New York online sports betting has been everything its proponents had hoped for. The state’s sportsbooks took nearly $2 billion in bets in the first 30 days, and generated over $70 million in taxes for state coffers.
Does the recent sports betting launch help or hurt?
Online gambling advocates often express the hope that successful sports betting launches will make online casino an easier lift. So far, though, there aren’t any clear examples of reality matching that hope. Looking at the states that already have legal online casinos:
- New Jersey did things the other way around, starting with iGaming in 2013 and adding sports betting later
- West Virginia and Pennsylvania legalized the two verticals separately, but passed their online casino bills before sports betting actually launched
- Michigan passed the full package all at once
- Connecticut used online casinos as a bargaining chip to get the state’s tribes to agree to its sports betting plan
True, the early success of NY sports betting may make the idea of iGaming more palatable for some. At the same time, however, many fence-sitters are likely to find it too much, too quickly.
One has only to look as far as Illinois to find evidence of this problem. Its first online sportsbook went live in June 2020. After a fairly smooth first year, state lawmakers introduced the Internet Gaming Act in the 2021 legislative session, with plans for an expedited launch.
Unfortunately, that effort stalled and went into hibernation until this year. While it’s still on the table, even one of its primary advocates, Sen. Cristina Castro, says she thinks it might not have much of a chance until 2023.
It’s good news for New Yorkers that a similar effort is already underway in their state. However, the smart money probably isn’t on it passing on the first try. Rather, this should be seen as the beginning of a conversation.
What’s in the bill?
At this point, enough states have legalized online casinos that there’s a standard way to do it. Like all those other states, the proposal for New York gives direct market access only to land-based casino operators. These would then be able to strike partnership deals with outside companies, allowing online operators an indirect path to market.
There are many variations on that formula, however. Each of the existing iGaming states has its own twists. Here’s how Addabbo’s proposal for New York compares.
Valid participants and partnerships
The New York bill would provide access to both commercial casino operators and tribal gaming operators in the state. In order to receive that market access, the commercial casinos have to commit to providing server space and equipment at cost to any tribal operator that wants to enter the market without a partnership.
Each legal operator can have up to two “mobile interactive gaming wagering platforms and brands.”
In other words, there is a limit of two skins per casino. There are at least a dozen land-based operators in the state, so this provides ample room for all major US online gambling brands, and a number of smaller ones.
Online operators will be able to use their own brands. However, the branding of the land-based partners must feature prominently as well, which is similar to Pennsylvania’s approach.
Taxes and fees
New York received a lot of criticism for imposing an eye-watering 51% tax rate on mobile sports betting. For online casinos, Addabbo’s proposed rate is a more manageable 25%. This is still considerably higher than the likes of New Jersey and Michigan, yet less than the 54% Pennsylvania applies to slots.
Licensing fees will be high up front. The land-based operators will have to pay a manageable $2 million apiece. However, online operators wishing to use their own brands will have to pay an additional $10 million. Although that’s a hefty sum, New York’s population and wealth should make it worth it, at least for the big name operators. It may prove an impediment for smaller brands, however.
The good news on that front is that the licenses will be good for 10 years. However, the bill leaves the renewal process and potential fees up to the New York State Gaming Commission, so there could be additional costs in the long run.
Where does the money go?
According to the bill, most of the taxes paid by NY online casinos would go to the State Lottery Fund for Education Aid.
However, it sets aside $11 million annually for the purpose of problem gambling education and treatment. Although that sounds like a big number at first, it might work out to a tiny percentage of the overall tax revenue.
New Jersey, Pennsylvania and Michigan each saw their online casino markets generate over $1 billion in gross revenue in 2021. Scaling for population and applying the 25% tax rate, New York can probably expect to generate at least $400 million in tax revenue from online casinos each year. Spending only 2-3% of that on mitigating the problems associated with the new product may be a decision that draws some criticism.
What about poker?
Addabbo’s bill doesn’t explicitly mention online poker. However, it doesn’t explicitly exclude it either.
This probably means that New York will end up considering poker to fall under the general umbrella of casino games. This is not uncommon and is, for instance, the way Michigan has handled it.
There is some language in the bill that seems to anticipate the inclusion of poker, at least:
“An authorized game may include gaming tournaments in which players compete against one another in on or more of the games authorized herein…”
Of course, this applies as much to concepts like slots tournaments as it does to poker. However, it does make it clear that Addabbo wants player-versus-player games to be permitted under the law.