New York Legislative Efforts
With neighboring New Jersey and Pennsylvania having dramatically expanded legalized gambling in the past year, New York has every incentive to do the same, lest its gambling revenues be seized by other states. Nevertheless, New York has struggled to pass legislation that will legalize online gambling as the legislation has run into opposition that has stalled its passage.
The New York narrowly missed approving online gambling in 2017 before taking the issue up again this year. The New York State Senate passed a bill to legalize online poker last year and the year before, but the bill failed to clear the New York Assembly. The lower house does not have the support for online gambling that is currently found in the upper chamber. The Senate had passed the bill with overwhelming support in previous years. Yet the Assembly has not even brought the bill up for a vote. In order to pass the bill, 76 votes are required in the Assembly and support was just short of that number. After passing the bill twice, the Senate did not bring the bill for a vote in 2018, ostensibly waiting for the Assembly to support online gambling.
The New York legislation would operate by categorizing online poker as a game of skill and not as a game of luck. This is the same vehicle that has been used to permit daily fantasy sports to operate. This would follow a prior ruling by a federal court in New York that stated that poker was not strictly a game of chance because it pits the skill level of players against each other. The proposed bill would allow licensees that are already permitted to operate certain games in the state to apply for a license. These licenses would be issued no later than 180 days after the passage of the legislation. The licensing fee would be set at $10 million, but this fee would then be able to be used towards the applicant’s tax obligations for five years after payment. The tax rate for online poker operators would be set at 15 percent.
The complications preventing the passage of online poker legalization are largely political. New York is known for its fractious politics, and Assembly is highly partisan in nature. Online gambling has drawn primarily Democratic support, but not enough to allow the bill to move forward. In addition, New York’s governor has not vocally supported online gaming which has prevented more Assemblymen from his own party from signing onto the bill. The governor purportedly has expressed concern that online gambling may negatively affect land-based casinos which will also harm tourism in New York. A prior gaming bill in 2013 expanded land-based gambling in New York, and there is a sentiment that those new casinos should be given the opportunity to succeed. This viewpoint is contrary to the experience in New Jersey, where online gambling has been accretive to overall casino revenue.
Currently, Indian tribes have exclusivity agreements with New York. Further, disputes between casinos regarding revenue sharing prevented them from unifying to get behind the bill. New York is currently embroiled in a dispute with the Seneca Nation which has resulted in the tribe’s withholding of fees. The general turmoil and discord in the existing gaming industry has forestalled any kind of unified viewpoint that can be used to lobby the Assembly.
In addition, legalization of sports betting is another initiative that has failed to gain approval. There is a possibility that proponents of gambling could seek to combine poker and sports betting into one bill to get them both across the finish line. Legalization of daily fantasy sports required a large legislative lift and may have already sapped the political will of the legislature for any further advances with regard to gaming.
Size of the New York Market
New York is already an established gaming market that still has yet untapped potential. The state is currently struggling to integrate new casinos that were opened as part of the state’s recent gaming expansion. Revenues for the new casinos have fallen short of expectations. Nevertheless the size of the pie in New York is large. In 2015, the existing racinos reaped over $2 billion in revenue from slot machines. The gaming expansion allowed table games at certain casinos, but revenues have not lived up to expectations. Some casinos have fallen as much as 44 percent behind revenue projections and have sought state assistance in the form of a lower tax rate.
New York is a large part of the daily fantasy sports market. After being frozen out of the activity until it could be legalized, New Yorkers have returned to DFS In large numbers. Currently, New York entries comprise roughly ten percent of the DFS market. The total DFS revenue nationwide in 2017 was approximately $335 million, meaning roughly $35 million in revenue originates from New York.
The horse racing industry has been an iconic institution in New York for over 100 years. Saratoga and Belmont are world-famous racetracks and the New York racing industry joins California as the two pre-eminent states for racing in the country. Horse racing revenues have declined in recent years consistent with the overall decline in the sport nationwide. The proliferation of gaming options has taken its toll on the sport. In 2016, handle at the state’s major tracks had fallen below $1.4 billion, a six percent drop from the previous year.
Future of Online Gaming in New York
New York faces an uncertain future with regard to online gambling. The state may have proverbially bitten off more than it can chew with regard to gaming expansion and may require some time to let the dust settle before it further expands gambling. However, with neighboring New Jersey and Pennsylvania having greatly expanded legalized gambling, New York may not have much time to get its house in order before it permanently loses customers to casinos in neighboring states. New York risks a return to the days where its residents took busses down to Atlantic City and New Jersey ended up benefiting from New York dollars.
It is anticipated that online gambling as well as sports gambling will eventually pass in New York. The 2018 legislative election may serve as the catalyst for passage. Democrats have largely been the party supportive of the expansion thus far, and the Democratic Party stands to gain seats in the upcoming legislative elections. The online gaming bill is likely to be brought up for passage yet again in the upcoming legislative session. At some point, the empirical data may convince legislators of the necessity of passing the legislation. Further, as casino operators lose business to neighboring states, they may gain the political will to band together in a unified lobbying effort.
Further, online poker has proven to be a popular game nationwide. New York residents may demand the ability to be able to engage in this activity legally from the comfort of their homes. The current legislation does not address other types of online table games. Given the loyalty of the political powers to the newly opened casinos, it is unlikely that online table games will be a part of any online gaming expansion until the new casinos steady themselves financially.