US Sports Betting Update – Nine Operators Gain New York Sports Betting Licenses
State of the Union: US Sports Betting Update – Nine Operators Gain New York Sports Betting Licenses
The New York State Gaming Commission has awarded online sports betting licenses to nine operators. DraftKings, BetMGM, FanDuel and Bally’s joined forces for one successful “super bid”, giving them the green light to launch in the Empire State. A second consortium, led by white-label provider Kambi and featuring Caesars Sportsbook, PointsBet, Rush Street Interactive, WynnBET and Resorts, was also successful. The sportsbooks are expected to launch in January 2022.
Regulators in the state were considering six applications. Kambi led a second bid with Fanatics and Barstool Sportsbook, which was seemingly unsuccessful. Bet365, theScore, and FOX Bet all made solo bids, and they have not been awarded licenses. The state would have taken a 35% tax rate on gross revenue if all six applications – and all 14 operators involved – were approved. However, licensing just nine operators means it will take an eye-watering 51% tax on gross revenue.
Sen. Joseph P. Addabbo Jr., a leading proponent for online sports betting in New York, said he expects the first bets to be taken during the NFL playoffs. The sportsbooks should be fully operational in time for the Super Bowl. “We’re still on par for that,” said Addabbo Jr.
Trio Abandoned Barstool Tie-Up Amid Portnoy Controversy
DraftKings, BetMGM, FanDuel, Bally Bet, Caesars Sportsbook, PointsBet, WynnBET and Resorts Sportsbook – owned by Malaysian gaming giant Genting – will all launch in New York. Rush Street Interactive owns two brands, BetRivers and PlaySugarHouse, and it has to decide which one to go with in the Empire State.
The New York Post reported that DraftKings, BetMGM and FanDuel initially considered adding Barstool Sportsbook to their “super bid”. However, they allegedly abandoned the plan due to founder Dave Portnoy’s “past erratic behavior”. Portnoy featured in a sec tape in which he yanked a leash on a collar around the neck of a 22-year-old model. Both said it was consensual, but it deterred the trio from teaming up with Barstool, and they opted for Bally’s instead.
“One of the reasons Bally’s was chosen was they were the least offensive,” a source with direct knowledge of the talks told the Post. “They saw a risk with Portnoy.” Another source reportedly said that the BetMGM team “always considered ourselves a class above Barstool”.
Penn National Gaming, the company behind Barstool Sportsbook, saw its share price decrease by 21% this week. Business Insider published an article alleging that Portnoy, the president of Barstool Sportsbook, engaged in potentially violent sexual acts with several women. He described the article as a “hit piece”. However, there are now fears that Barstool Sportsbook will struggle to gain licenses in other states.
Pretlow Expresses Disappointment at High Tax Rate
There was also disappointment for music mogul Jay-Z, who led the bid featuring Kambi, Barstool Sportsbook and Fanatics – the gaming division of the sports apparel company, run by former FanDuel chief executive Matt King – after it did not receive a license. The situation may change in future, but it seems that New York is happy with nine operators and a tax rate of at least 51%. That was the wish of former governor Andrew Cuomo.
New York Assemblyman Gary Pretlow, who worked hard in tandem with Addabbo Jr. to legalize sports betting in the state,expressed his disappointment at the news. He believes operators will need to offer poor odds in order to make it commercially viable to launch in the state. The tax will be applied to gross gaming revenue – which is charged before promotions are taken into account – so operators may not offer the same sort of competitive welcome bonuses and promotions they provide elsewhere.
They must also pay a $25 million licensing fee, so it will be hard for them to earn a profit in New York. Penn National chief executive Jay Snowden recently said that nobody will make money in the state. “When you keep in mind that the 50% tax is in addition to a really high license fee as well as that 50% tax is on gross, pre-promo spend, not net, I don’t think anybody’s going to make money operator-wise. The state’s going to make money. I don’t think a single operator will make money in New York.”
Pretlow added: “My suggestion, and they’re not going to listen to me, is to accept everybody and to let the market determine who’s successful and who isn’t. For them to harp on this ridiculous 52% or 53% tax rate, I don’t think is going to be doable. I think it’s going to adversely affect the odds, which is going to adversely affect the play.”
Surrounded by Entities with Better Odds
Pretlow fears that New Yorkers will continue to visit New Jersey to place bets. “If you know anything about gaming, you would give your left foot for a half a point. And if New Jersey is going to offer better odds on a game, any game, than New York, the people that are betting – especially the big bettors – they’re going to go to Jersey. “They’re used to going to Jersey already, they go to Jersey now, and for that half a point they’re going to go to Jersey. And they can go to Connecticut. We’re surrounded by entities that will have better odds than what we have.”
However, Addabbo Jr. insists New York can compete with the Garden State. He claims that 25% of bets in New Jersey are placed by New York residents, and he thinks the convenience of wagering in their home state will be the deciding factor. New Jersey currently has the largest sports betting handle in the country, but Addabbo Jr. hopes New York can eclipse that soon.
The nine operators can launch on their own schedule, but they must choose one of four brick-and-mortar casinos to house their servers, and the New York State Gaming Commission must approve those locations. The server rooms also need to be constructed and signed off. There will be lots of bureaucracy, so it could be a couple of months before the state is ready to launch.