Second bite of the Big Apple: Is there still hope for mobile betting in NY?

“New York moved a giant step toward legalized sports betting”. So ran the first line of a New York Times article in late January after the state’s gaming commission offered initial approval of a set of sports betting regulations.

Operators could be forgiven, however, for not breaking out the champagne. The regulations, which are now open for consultation, were for land-based sports betting only. That means the four upstate properties and 15 tribal casinos. The result is a potentially miniscule market for such a populous state. According to Regulus Partners: “New York’s initial foray into sports betting is likely to struggle to make double digits in annual GGR, in our view, suggesting tax yields of just US$1-2m (on a 10% rate).”

So while betting could be live by mid-2019, the initial expansion is clearly seen as a mere stepping stone for operators eying the state. As Regulus notes, FanDuel, DraftKings and bet365 are three of the four announced partners of the New York casinos (along with Rush Street/Kambi) and none have any real retail pedigree.

“It might feel like the step from no betting to betting in casinos in a big one, but by comparison in a state like New York, going online is more of a giant leap,” Regulus notes. “For it to happen, lobbying will have to be foot-perfect, inclusive of all key stakeholders, strongly socially responsible, but above all lucky…”

Barriers

The main obstacle at present is the governor’s office and its interpretation of the state constitution.  The Cuomo administration, specifically budget director Robert Mujica, is on record saying that authorizing online bets would require changing the state constitution. This in turn requires passage by two separate legislatures and approval via a voter referendum, which would take until 2021 at the very earliest.

There is hope however that the governor’s office is wrong in its interpretation and that mobile betting could be authorized as soon as this year. The charge is being led by Senator Joseph Addabbo, the chair of the Senate committee on racing, gaming and wagering, who says that locating gaming servers within the NY casinos would satisfy the constitutional restrictions and allow online sports wagering.

His argument is reinforced by three separate gaming lawyers contacted by EGR North America. “From a legal point of view, I believe [mobile betting] can be done without another constitutional amendment, but this is political rather than legal,” says Jeremy P. Kleiman, from New Jersey law firm Saiber LLC. “In other words, it doesn’t much matter who is right.  The governor won’t sign any legislation if he thinks a constitutional amendment is needed.”

Jeff Ifrah from Ifrah Law also says no constitutional amendment is needed, while gaming attorney Daniel Wallach is perhaps the most bullish, telling EGR: “There is no constitutional prohibition on mobile wagering.

“The constitution has broad prohibitions against categories of gambling and has exceptions for categories such as the lottery, pari-mutuel betting on racing and casino gambling. These are type of gambling and mobile betting is not a separate category of gambling, it is simply a delivery method,” Wallach says. “That’s the plain language reading of the constitution.”

So why does Governor Cuomo’s office think otherwise? “You’ll have to ask him,” says Wallach. “I would note it’s his budget director saying otherwise and quite honestly as an experienced appellate lawyer, I’ll go with my interpretation. I’ve studied this issue for many years and written about the New York constitution in other areas like fantasy sports and it’s plain to me.”

Will it get there?

Unlike Kleiman, Wallach thinks there’s a “strong likelihood” the governor would ultimately sign a mobile sports betting bill if it were delivered to him having been passed by both houses of the legislature. “By the time it is given to him for consideration he should have had the benefit of all the legal opinions, including mine, that mobile wagering is not a separate category of betting,” he says.

The obvious follow up question is whether the New York legislature will be able to deliver that bill, and again the signs are broadly positive, led by Addabbo. The senator is calling for a major expansion of online gambling – including mobile betting, online poker and casino – to help fill a $2.3bn project budget gap.

“In this day and age, we do everything from ordering food to purchasing movie tickets through the phone,” Addabbo told Legal Sports Report. “Mobile is part of our daily lives. Doing something as big as sports betting or any other type of gaming and cutting out the mobile aspect really leaves us in the 20th century, and I’d like to stay in the 21st century.”

The tangential signs are also positive. Remember, the need to fill a hole in the budget was one of the reasons Pennsylvania ultimately went online, while New York’s neighbors will soon start to apply some pressure of their own – albeit unintentionally.

“Look at what will happened if New York doesn’t act,” Wallach says. “It will be surrounded on all its borders by states with legal betting and mobile betting. New Jersey has it, Massachusetts has a dozen bills in progress, they will likely have mobile betting before the end of the calendar year, Rhode Island has it, Pennsylvania has it.

“And what do you think will happen then? New York will lose out on all those revenues and it will see thousands of residents crossing the Hudson river or the George Washington bridge to bet on a sporting event on their phone.”

Indeed, Eilers & Krejick Gaming cited industry sources in a recent note, claiming that some New Jersey sportsbooks are generating as much as 25% of their handle from out-of-state players, with a huge chunk of them coming from New York.

“Just last year, mobile betting bills had support of the chairs of the wagering committees and at no point did the governor or anyone from the executive branch say there was a constitutional concern,” Wallach says. “From what I heard they almost had the votes needed. It was very close to the finish line and I believe the legislature will move forward this year and approve a sports betting bill with mobile.

“Otherwise it would be a prohibition on mobile betting as effective as the ban booze in the 20s. It will hurt no one except the state of New York and its residents.”

Recall that Gambling Compliance projects New York to have the largest market in the US by 2023 should mobile be permitted, with revenue of more than $700m. That’s a prize the state would be foolish to miss out on, and it seems optimism is growing that it won’t.