Authored by Eren Ucer and Professors Reis and MdBride
Regulation of the Sports Betting Industry in NY State
It is clear that sports betting is a growing industry whose impact can be double-edged: while very lucrative and a major economic force, it can lead to the development of problem gambling behaviors amongst the general population. Before we can argue for specific changes or areas of improvement in the sports betting industry, we must examine the current regulatory landscape, specifically in New York State. Currently, New York State has one of the highest tax rates on sportsbook operators among states, at 51%, alongside New Hampshire and Rhode Island. This is much higher than in some other states, namely New Jersey and Illinois, which, while the 2nd- and 3rd-most-profitable states for sports betting, have tax rates of 13% and 15%, respectively. It is important to note that this rate applies only to the net revenue sportsbooks generate, not to their gross earnings. Currently, 9 sportsbook operators have been licensed in New York: FanDuel, Fanatics, Resorts World Bet, WunnBet, DraftKings, Caesars, BetRivers, Met MGM, and Bally Bet. Gaining a license from the State of New York requires a one-time payment of $25 million and adherence to various “good standing” /compliance laws, such as accurate reporting of financial statements and a lack of fraud or misrepresentation within betting lines. (New York Gambling Commission Par 5329 6-7). As for special limitations under New York’s legislation, the state bans betting on NCAA teams. That is, no college games that include at least one New York team can be bet on, regardless of which the game is being played. However, games between two out-of-state college teams playing in New York State (say, at MSG or Barclays Center) may be bet on.
In 2023, its second year of operation, New York State generated $863 million in tax revenue from sportsbook operators. In 2022, this number was $693 million, but it also included an additional $200 million in licensing fees. These figures represent a near-25% year-on-year increase in revenue from sports betting alone. In January of 2024, New York State set a single-month record for revenue generated by sportsbooks: a whopping $211.5 million, helping generate $107 million in tax revenue in one month alone. In comparison, the amount of tax revenue New York generated in 2023 from the marijuana industry, another recently legalized “recreation”, was only $56 million. According to the Governor’s office, most of the money generated from sports betting is allocated towards education, youth sports, and responsible gambling services. According to the 2023 State Comptroller’s report, initial financial predictions for sports betting revenue during the first fiscal year quarter of 2021-2022 were $99 million, but in reality, $360 million was generated. In addition to this, the same report states that “since mobile sports wagering has gone into effect, gross gaming revenue from in-person sports wagering at the state’s commercial casinos has declined by 45 percent in SFY 2022-23, adding further evidence to the rise of popularity of online-based sports betting platforms amongst the gambling public.
Alongside the financial growth, the development of problem gambling disorders in New York State has also increased since the legalization of sports betting in early 2022. Between 20212-2022, the New York State Gaming Commission noted a 26% increase in problem gambling-related calls to the Office of Addiction Services and Supports. It is estimated that New Yorkers, on average, lose $4 million a day on sports betting. Logically, while all projections show that sports betting revenues will rise alongside state tax revenue, we must remember that this money is coming out of our fellow citizens’ pockets. According to the state comptroller, “Gaming has significantly expanded in the state in the last several years… With the ease and 24/7 availability of mobile betting apps, problem gambling and addiction are poised to increase. More attention should be devoted to understanding the implications of mobile sports betting, particularly on New Yorkers.” Mr. DiNapoli is not the only political figure in New York cautious and worried about the rise in sports betting. House Representative Paul Tonko, an Albany area Democrat, has been vocal about his qualms relating to sports betting, stating that “We need to avoid potential crisis here… The most vulnerable by category in our society are those preyed upon by this advertising frenzy,” when speaking about the development of gambling addiction amongst the youth. ”It’s not just whether team A beats team B in the Super Bowl, but it’s every inch of the game, every play. Will it be a run? Will it be a pass?… How many dollars are going to be required of these states to address yet another illness of addiction?” Politicians like Tonko understand on a deeper level the potential risks associated with the increased popularity of sports betting platforms, but voices like his are few and far between. With an industry as profitable and established as gambling, federal and state politicians have to balance their constituents’ interests while maintaining sufficient control and oversight to ensure the industry is safely consumed by the general public. It is likely that, as a society, we will not know the long-term effects of sports betting on our culture until at least a few years, or even decades, pass by.
