New York Budget Reconciliation Puts Gambling Expansion On The Table

Written By Derek Helling on March 16, 2022
New York Budget Reconciliation Tests The Survival Of Gambling Measures

The New York budget is a lot more than Gov. Kathy Hochul‘s billion-dollar handout of taxpayer dollars to the Pegula family. Because it’s a significant source of revenue for the state each year, gambling is a big part of it.

This year, the treatment of gaming in the state budget could open the state up to more online sportsbooks and downstate New York casinos on a faster timeline. For that to happen, though, current proposals need to survive the reconciliation process.

New York budget proposals include gambling expansion

Hochul’s bid to provide $1 billion in tax revenue for a new stadium for the Buffalo Bills has gotten a lot of attention. That’s mostly because it would be the largest public subsidy for a venue with an NFL franchise as an anchor tenant ever.

Perhaps overshadowed but also of importance is a pair of gambling measures. The Assembly’s budget includes a proposal from Assemblyman Gary Pretlow. His amendment would open the door for up to seven more online sportsbooks in the state.

The Senate version has a similar amendment in it. It adds to that, though. The amendment from Sen. Joe Addabbo would bump up the process of licensing downstate casinos. It would give Class III licenses to MGM Empire City in Yonkers and Resorts World NYC in Jamaica.

That would allow those properties to transform from “slot parlors” to fully-fledged casinos with retail sportsbooks and table games. Then, another Class III license would be the prize in a bidding process.

Also of note is what both one-house budgets exclude, namely, a proposal to legalize online casinos and online poker in New York. While it’s still possible the legislature could take that up as a separate item, that seems unlikely to happen this year.

What’s the likelihood of the downstate casinos and online sports betting expansion making it into the final budget? A look at the numbers and the latest reporting out of Albany sheds some light on that question.

Casino proposal might have an easier path

If you’re a betting person, the favorite between the two proposals has to be the downstate casinos amendment. The potential new revenue for the state implied there is a big reason why.

In addition to new gaming taxes collected from in-person sports betting and table games at MGM Empire City and Resorts World NYC, there’s the monumental licensing fee for the new casino.

The Senate budget proposal sets that at no less than $1 billion. Additionally, there would be monthly gaming taxes from that facility as well. The state is likely to collect on those, too.

Several gambling companies have confirmed they are at least kicking the tires on a downstate NY casino. Those include Hard Rock and the Las Vegas Sands Co. That’s a net gain for the state’s coffers. For that reason, this proposal stands a good chance to make it into the final budget.

Neither assembly leaders nor Hochul has expressed resistance to starting the licensing process for downstate casinos a year early. Originally, the state wasn’t set to do so until 2023.

The path forward for the addition of online sports betting licenses and a potential operator-friendly adjustment to the tax rate might have a more difficult path in comparison. The context of that comparison is important to remember.

Will NY online sportsbooks get the tax break, grow in number?

Pretlow’s proposal increases the number of operators and decreases the current national-high revenue split between them and the state. There could be some resistance to the first part of that.

According to Mike Mazzeo of sister site PlayNY, Addabbo thinks the current statute doesn’t allow for a change in the rate. Addabbo stressed, however, that the New York budget reconciliation is all about ironing out differences between the two one-house proposals.

Pretlow’s amendment would increase the number of operators to 15 by the end of January 2023. At that time, the rate would drop to 35%. The following year, the number of licenses would again escalate to 16 while the rate would decline to 25%.

Pretlow has prioritized making sure that the state doesn’t lose any revenue in the change. That’s why this amendment might see some resistance, however. With three operators controlling 95% of the market for online sports betting in NY, it’s fair to question whether adding operators would cause a proportional rise in revenue to account for a diminished split.

Then there is the framing of this possible change that the amendment could have to struggle against. That’s when it’s important to remember Addabbo’s words that reconciliation is a negotiation process.

Are gambling measures policy or straight math?

According to Dan Clark of New York Now, perception could be everything. Clark reports that Assembly Speaker Carl Heastie said that a majority of the members of that chamber,

“Would prefer a state budget stripped of policy and focused solely on spending and revenue.”

In both one-house proposals, that rings true. The package of legislation out of both chambers is largely devoid of any of Hochul’s policy proposals. An example is the permanent legalization of businesses with liquor licenses being able to sell alcohol for carryout.

Hochul told reporters that policy will be in the budget and that she wants to meet the April 1 deadline for the state to have a final budget in place. It doesn’t appear that either of these gambling amendments carries that policy tag so far.

If they can continue to live in the realm of “revenue and spending only,” their survival of reconciliation looks more feasible. The biggest question right now seems to be whether the reduction of the revenue split for online sports betting will be in the final version of the New York budget.

Should that happen, the revenue from as many as 16 online sportsbooks might be part of the tax money that ends up in the Pegula family’s bank account over the next few decades.

Photo by Ivan Marc
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Derek Helling

Derek Helling is a lead writer for PlayUSA and the manager of BetHer. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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