New York State participation in various forms of gambling has been expanding greatly in recent years. Online sports betting has arrived. You may have noticed all the TV commercials for the online sites.
Not so long-ago legalized gambling in the state was limited to horse racetracks and bingo. But then came:
- Off-track betting (OTB) on horse racing through a series of regional public benefit corporations created in the early 1970s – with proceeds directed to member local governments and participants in horse racing. The Western Regional Off-Track Betting Corporation projects $5.7 million in revenues for member municipalities in 2022.
- Lottery ticket sales – with proceeds directed to education; revenues of $2.6 billion for 2022.
- Full scale casinos with slot machines and table games on land currently or previously belonging to native American tribes – with proceeds directed to the state and to local governments that “host” the casinos. The state projects $479 million coming to the state and $179 million to localities in 2022, but much of that amount relates to anticipated receipt of back-payments owed by the Seneca Nation for their casinos.
- Video lottery gaming at casinos located at state-authorized racetracks – with proceeds directed to education; $34 million projected for 2022.
- Interactive Fantasy Sports, which allows participants to create fantasy teams, is presently legal but that could change – proceeds are directed to education; $7 million projected for 2022.
- Full scale casinos in upstate locations operated by private companies licensed by the state – with proceeds directed to education and localities; $135 million to education; $34 million to localities.
- Corporately owned online sports betting, just started in January of this year, with proceeds directed to the state. Original licensing fees going to the state were $200 million, plus revenues from the tax on operators’ income, projected at $50 million between January 8 and March 31, 2022. Through March 6th the state’s share of the proceeds was already $121.6 million.
The State Legislature is currently considering authorizing two additional casinos in New York City or its suburbs, looking for additional licensing fees going to the state in an amount ranging from $500 million to $1 billion.
The original rationale for the gambling opportunities centered around:
- Closing down or limiting illegal gambling operations such as bookmaking on horse racing and “numbers” games. OTB was designed to pull away the action from horse race bookies. The lottery system was intended to shut down the streets-run “numbers” racket.
- The state and at least some of its municipalities could benefit from increased revenues generated. School systems were included in the revenue sharing through the lotteries and some casino revenues.
- Given the explosion in gambling activities throughout the United States, New York, for revenue and perhaps tourism purposes, needed to be competitive.
It is likely that there remain some forms of illegal gambling in the state (ignoring such things as NCAA tournament brackets and football square pools), but it is safe to say that gambling in New York is now big business, and the state is an active partner with the operators of various activities. The latest and greatest, online sports betting, is gambling on steroids.
Things in the world of state-authorized gambling don’t always work out as originally intended. Take, for example, off-track betting.
A review of expenses and revenues at the Western Regional OTB Corporation shows that the casino owned by the corporation in Batavia and its online horse betting are the only money makers for the organization. Every single onsite betting location run by the corporation is losing money. While betting parlors remain open and facilitate those inclined to bet on horses, it could be argued that the parlors are basically a form of public employment and not much else. Even if the operation of the parlors performs some service for its customers, the bottom line is that member municipalities of the corporation are losing revenues that support OTB’s staff, real estate, and other operating costs. New York City shut down its OTB operations in 2010.
The Western Regional OTB’s problems don’t stop with the losing operations of the parlors. Their system of management that personally rewards board members and certain staff with personnel benefits and perks like football and hockey tickets are under attack with legislation promoted by Senator Tim Kennedy and Assemblymember Monica Wallace that would reform those management practices.
The operation of the private upstate casinos has not proven to be the revenue generator that was anticipated.
But then came along online sports betting which in the first few weeks that it has been available in the state, is producing revenues well beyond anything that the budget makers in Albany even dreamed of. In the first eight weeks of operation more than $3.5 billion in bets have been run through the systems of the licensed operators. For the first ten years of the new form of gambling the state will collect a tax of 51 percent on operators’ profits, plus licensing fees which for the original set of operators produced $200 million for the state. The state’s cut of the betting proceeds was anticipated to be $250 million in the first year, including the licensing fees; the actual total might be more than $700 million. Out year projections are also skyrocketing.
Talks are underway to increase the number of licensed online operators, with visions of hundreds of millions of dollars in additional license fees dancing in the heads of those seeking to expand the field.
While various arguments can be made about the value or problems generated by the state’s expanding gambling networks, online sports betting is in a league by itself. The implications are significant and troubling.
- With the ease of using personal cell phones to place bets, the lure of betting is so much more than someone sitting in an OTB parlor waiting to bet on the next available horse race. Assuming you have money on the operators’ systems ready to bet, you can make a wager every few seconds.
- The operators are all dangling incentives to bettors by offering initial bet credits that potentially could produce a big win for the bettor – except that the winnings just get added to the gambling kitty of the bettor, available for more betting that may or may not produce actual winnings. Marketing at its worst.
- The gambling is being bastardized with so-called “prop” bets, where the gambler does not even need to bet on the outcome of a game but just on a particular play or scoring opportunity.
- The ease of gambling is no doubt attracting participation by new gamblers intrigued by possible winning but unprepared for likely losses.
Professional sports leagues have had a long history of distancing themselves from gambling, but now they are welcoming the revenue opportunities that are produced. The National Football League this past season salved its conscience by running commercials during games advising people to gamble carefully while also providing information about help-lines available to gamblers who get in deep financial trouble. Kim Pegula, President of the Buffalo Bills, was quoted in the Buffalo News in 2019: “I’m not saying I’m necessarily morally for betting, but we need to have that opportunity to provide (the) amenity for our fans. And we should be the ones to be able to have that opportunity, because it’s our game.” Of course!
And then there is potentially the impact on the athletes themselves. It would seem that with the extraordinarily large salaries paid to professional players that they would not be interested in trying to affect a game’s outcome for personal gain, but what about some (mostly) unpaid college athletes? One must wonder what Paul Hornung, Alex Karras, and Pete Rose, who were all penalized for gambling activities by their leagues, must think about how the gambling opportunities are expanding today.
I bet that there will be significant negative impacts as online sports betting explodes. It will affect the leagues too. I just wonder what the odds are.
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