New York’s high hopes for online sports betting during the 2023 fiscal year will hinge on how well sportsbooks perform during the upcoming NFL season.
And that financial performance could potentially impact future legislative efforts in the state to add online casino gaming and online poker.
Gov. Kathy Hochul’s enacted budget for FY2023 (April 1, 2022, to March 31, 2023) projects New York will generate $615 million in tax revenue from NY online sports betting. That’s up from $496 million in Hochul’s January executive budget proposal.
The enacted budget from former Gov. Andrew Cuomo for FY2022 had targeted $346 million in online sports betting tax revenue for the state in FY2023.
The projections increased as a result of the state’s record-breaking start following the launch of online sports betting on Jan. 8.
So far in FY2023, NY has generated $109 million in tax revenue from online sports betting over the first two full months, April and May.
Long-term NY sports betting projections below FY2023
Interestingly, New York projects $454 million from online sports betting in FY2024 (26% decrease), $482 million in FY2025, $498 million in FY2026 and $507 million in FY2027.
New York sports betting doesn’t offer as many markets as neighboring New Jersey and Pennsylvania. That includes individual player award futures and draft betting, among others. Policymakers will consider changes, though, to make NY more competitive.
“Projections are always tricky,” Sen. Joe Addabbo told PlayNY. “And I always refer back to when New Jersey first started, and how they overestimated revenues. But before we came along they were very successful, and still are. And when they first started, their actual numbers were well below their projections. But there’s not a person on earth that thinks Jersey is a failure at sports betting.”
Addabbo emphasized his caution surrounding projections. He has always believed that “whatever New York gets is gravy, because we’ve never had it before.”
Addabbo continued: “And now look at us. We’re leading the nation — and it’s roughly ($267 million) in educational funds (through May). That’s great. But I’d be very cautious with projections. That’s why I’m never satisfied. No matter what the projections are and how we’re doing, I always want the product to be better for the people of New York. I want to shatter the ceiling. But we’re certainly ahead of the projections that Gov. Cuomo did.
“Is the 51% sustainable? Is this kind of level sustainable? There’s so many variables in online sports betting, it’s such a competitive industry. We’ll see.”
Upcoming NFL season could be end for promo play
New York’s big numbers early on — including a US-record $1.67 billion in January online sports betting handle — were aided by massive promotional and marketing spend by NY sportsbooks. This obviously helps expedite customer acquisition. But those operators have significantly cut back on promotional and marketing spend in NY. All while repeatedly complaining about the state’s 51% tax rate.
Lobbying and legislative efforts to get a reduction via operator expansion were unsuccessful. Although lawmakers figure to revisit the issue later this year. For now, however, the state has no reason to mess with its cash cow. And operators were well aware of what the tax rate was going to be when they opened their businesses in NY for the state’s coveted market access.
Online sportsbooks will be incentivized to add some promotional play during their first full NFL season in NY. But it will pale in comparison to what they spent at the outset — especially since the state taxes promotional play.
“Yes, we dumped a ton into the market when we launched, but we’re not going to do launch-level promotional funds (again),” one NY online sportsbook source told PlayNY.
“Even if it was a state that had complete deduction for promotional funds, we wouldn’t do launch-level promotional funds in perpetuity.”
NY online casino legalization potentially impacted by revenue targets
Whether New York reaches its tax revenue targets from online sports betting for educational funding could determine if NY online casino gaming gets added.
“If they hit their target, there’s less of an impetus to get into a discussion on a complex issue,” one industry source opined to PlayNY.
Addabbo introduced an iGaming bill late in this past year’s NYS legislative session as a way to get the conversation started. But hurdles remain, such as the potential for increased addiction due to a more wide player pool than online sports betting, as well as increased hours (24/7) for play.
“What state wouldn’t want more revenue and more educational funding — especially when they see some of that iGaming money leaving New York is either going to another state or doing it illegally?” said Addabbo, who is running for re-election in District 15. “So you want to secure that, regulate it and make it safer. That’s my point of view.
“I do believe with iGaming, probably our biggest challenge — bigger than the downstate licenses, bigger than mobile sports betting — is the challenge of addiction with iGaming. I think it’s trickier, and therefore we’ll look to do more funds and more in-tune with OASAS on how we address addiction even further.”