Could New York Look to Sports Betting to Ease the COVID-19 Deficit?
- Sep 2, 2020
- Earl Clukies
The economic shutdown to slow the spread of COVID-19 has left New York facing billions of dollars of deficit over the next two years. New York Governor Andrew Cuomo said the fiscal needs for New York far exceed what could be generated through increasing taxes on the wealthy. Could part of the answer be the legalization of mobile and online sports wagering in the State of New York?
Sports betting in New York is legal, though action is currently limited to the state’s tribal and commercial casinos. One must be 21 years of age to bet at New York sportsbooks, most of which are located Upstate. New York was one of the first states to pass legislation authorizing sports betting back in 2013, but the first legal wagers were not accepted until July 2019.
Since the legalization of mobile and online sports betting, neighboring states have seen a steady increase in tax revenue. The emergence of mobile and online sportsbooks such as FanDuel and DraftKings has allowed bettors to participate in the action without leaving the comfort of their homes. Bettors in areas where mobile and online sports betting is not legal, such as New York City, take advantage of its neighbors’ legal sports betting. Crossing state lines to bet with sportsbooks based in New Jersey or Pennsylvania remains a practical option for most of the state’s population, which is heavily centered around New York City and the Hudson Valley. However, this pushes millions of dollars in tax revenue from New York City sports bettors into the hands of New Jersey lawmakers.
New York is the fourth largest state in the nation, with New York City centering a metropolitan area home to over 20 million people. New York also claims a large number of professional sports teams with rabid followings: The Yankees, Giants, Knicks, Jets, Nets, Mets, Islanders and Rangers are just some of the storied franchises that call New York home. Mobile and online betting are not currently available in the New York, but their legalization would undoubtedly produce one of the biggest sports betting markets in the country.
While they’ve missed out on a huge chunk of mobile and online revenue, the state’s casinos are bringing in dollars thanks to the flourishing legal sports betting market. According to the Legal Sports Report, total New York sports betting revenue reached $9.6 million and generated over $964,000 in tax revenue from June 2018 through August 2020.
These numbers make New York one of the smallest markets for legal sports betting. By comparison, there was over $7.7 billion wagered in New Jersey during the same period, generating about $532 million in revenue and $70 million in tax revenue, even though the state’s population is less than half that of New York’s. This is due to the fact that over 80% of wagers placed in New Jersey are entered remotely. Moreover, before the pandemic, sports wagering was trending upward. In New Jersey, sports wagering was at its lowest point in June 2018 at $16.4 million and peaked at $562.7 million in the month of November 2019.
Over the past year, there has been a strong push for the legalization of mobile and online sports wagering. According to Odds.com, mobile and online sports wagering could realistically generate an annual tax revenue of approximately $90 million and the state may command nearly $200 million if they were to tax multiple online gambling licenses at a rate closer to 20%. Considering New York’s deficit amplified the coronavirus, New York lawmakers may take a longer look at mobile and online sports wagering.
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Earl Clukies is a Senior Manager in the Financial Services Group with over five years of experience.
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