Scenes from the Monmouth Park Sports Book in Oceanport, New Jersey. (DOMINICK REUTER/AFP via Getty Images)
BETTING & FANTASY

Are New York Gamblers Done with New Jersey? Not So Fast.

The limitations to the Empire State’s wagering laws will frustrate bettors as legalized gambling ramps up, Assemblyman J. Gary Pretlow tells Boardroom.

New Yorkers will be able to gamble online and from their mobile devices by mid-January, but one New York lawmaker thinks the big bettors will still flock to New Jersey to gamble. Assemblyman J. Gary Pretlow’s reasoning lies in the wording of the New York law and the recod-high tax rates that the licensed sportsbooks will have to pay,

Pretlow foresees a rocky road ahead for the sports gambling industry in New York, he told Boardroom in an interview from his office in Mount Vernon, New York.

What New York should have done, he said, was emulate New Jersey’s success.

New Jersey has proven to be very successful,” Pretlow said. “They’ve even admitted that 30% of their revenue comes from New York, and I’m hoping that changes.”

But as for whether it ultimately will, color the Assemblyman skeptical.

“If the odds are so detrimental to New York bettors, the large bettors are going to continue to go to New Jersey,” he added, looking ahead to how sportsbooks will adjust their approach based on the higher tax rates.

“The smaller bettors, the $1 and $2 bettors, will still be betting on their phones in New York. But if you can get a better point spread going to Jersey and you’re betting hundreds of dollars on a game, you are going to pay that toll and get the better point spread,” he said.

And Pretlow knows what he’s talking about, both due to his position in Albany generally and his experience converting many of New York’s horse racing facilities into quasi-casinos specifically. A Democrat who tried to work with former Gov. Andrew Cuomo on enacting a different law that would have allowed as many as 25 different companies to operate in New York with a lower tax rate, the New York State Gaming Commission was ultimately stacked with Cuomo loyalists.

Pretlow and the former governor grew further and further apart on the issue. As a result, a bill that he and Joseph Addabbo Jr. co-sponsored in the state legislature was not enacted.

That bill would have included gambling parlors at former off-track betting locations in New York City along with other key details, including a “kill switch” that would allow problem gamblers to permanently opt out of legalized gambling.

Instead, New York passed a law that allowed only two licenses to be granted, which were awarded last week to two consortiums of sportsbook companies. One license went to a group that included DraftKings, FanDuel, Bally’s, and BetMGM, and the other went to a group comprised of PointsBet, Caesars, Resorts World, and WynnBet, plus technology and data support from Kambi. These licenses run for 10 years, while large gambling companies including FOXBet, Bet365, Betway, theScore, Barstool Sportsbook, Fanatics were shut out of what could become America’s largest sports gambling market for the next decade.

What the books are waiting on at the moment is the installation of computer servers, which must be built at New York’s upstate casinos in order to comply with the law Cuomo pushed through last year while he still sat in the big chair. Once those servers are tested and debugged, online gambling will be up and running.

Then, everyone will simply have to wait and see whether the system is actually working. And if what happened in Connecticut serves as a guide, a round of debugging will be needed.

Gamblers in the Constitution State have had problems opening accounts with some licensed sportsbook companies because of flaws in the manner in which users’ public information is incorporated into the signup protocols that sportsbooks must adhere to in order to comply with Connecticut’s law.

Pretlow also noted an additional obstacle in the New York law that has been under-discussed: ongoing disputes that have angered Native American tribes there and prevented large swaths of upstate residents from betting. Those casinos have accepted sports wagers for a few years now, but only on-site. They have received one-time payments of $2 million from each of the state’s nine new operating companies — known in the industry as skins — but the unavoidable fact is that these casinos’ monopoly on the upstate gambling market is coming to an end.

Further, the licensed sports gambling companies will pay $25 million each up front, giving the state government an immediate infusion of $200 million. But with the tax rate on the gaming companies locked in at 51% for a decade, those companies will be inevitably limited in terms of the promotions they will be able to offer to New York customers.

And as a practical matter, they may be forced to post different odds in New York than they are posting in New Jersey in order to maintain a house edge and make a profit.

“Trying to get an exorbitant tax rate out of the operators of sports betting was not inclusive, and for a state like New York, everyone should have been allowed to participate. Under this plan it’s being limited to a select few,” Pretlow said. “None of that select few happen to be fully representative of the state of New York. There is no minority participation, there is no Native American participation. The groups that have been chosen are the big players in the game, and they’ll probably be successful or semi-successful, but I think the opportunity should have been given that other entities could have gotten into the market and given it a shot They not all would have been successful, but at least they could have tried.”

If the problems are major, fixing them would be similarly complicated because of the 10-year lifespan of these licenses. State law would have to be changed before any alterations could be made, and New York’s legislature simply has other priorities due to the economic damage and public health issues the COVID-19 pandemic has caused.

This all looks like a bit of a rocky road all the way from Montauk to Buffalo, and how New York’s gamblers navigate it remains to be seen. But if Pretlow’s prediction is correct, the taxpayers of the Empire State will not have the tax revenues or the gambling choices that their neighbors in New Jersey have had for nearly three and a half years.

When everything goes live in mid-January, we will have more clarity.

In the meantime, New Yorkers should consider themselves forewarned.

Frustratingly for Pretlow, it did not have to be this way. Under his and Addabbo’s alternate legislation that was not passed, there would have been gambling parlors just like the ones in Washington, DC, where on-site betting is still more popular than online betting. Watching sports with fellow gamblers is a fun experience, as anyone who has been to a sportsbook in Las Vegas can attest — New Yorkers will not have that option for at least a decade as the current rules reads.

Those rules would have also required each company operating in New York to open a New York office, too, solidifying a foundation of commitment and accountability.

“Betting on your phone is boring,” Pretlow said. “I don’t know if it is going to work under the current circumstances.”

That may or may not ultimately prove to be true. But as things stand, more than a few warning signs appear very real.

To be continued.

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