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Even as New York continues to gather a record haul of tax dollars from online sports gambling and works through the process of approving three brick-and-mortar casinos for the New York City region, some lawmakers have their eye on a potentially even bigger prize.

State Sen. Joseph Addabbo Jr. of Queens said he is hopeful that iGaming will be part of next month’s budget discussions for 2023 and that it could be a bigger moneymaker for the state than online sports gambling, which has produced nearly $80 million in tax revenue in its first five weeks of operation.

“The quick answer is, yes, we want to have that initial discussion on iGaming this year,” Addabbo said. “If we can put it in this budget, great. That’s what I’m hoping.”

New Jersey’s model

New York once again would be playing catch-up with neighboring New Jersey, where more than 30 sites offer the mobile version of slots, table games, and/or poker. The massive volume New York has done in online sports gambling, with nearly $2.5 billion in handle reported so far, seems to be fueling the push to speed up the approval of iGaming.

“In New Jersey and other states, while brick-and-mortar casinos were getting hit by the pandemic, iGaming numbers were going through the roof,” Addabbo said. “Even post-pandemic, there may be a population that is not crazy about going into large gatherings like you’d see at a casino. iGaming is an opportunity. Again, we’re always wary of the addiction issue, but this would mean more money for doing it safely.”

New York has dedicated 98% of its take from a 51% tax rate on online sports betting revenue to go toward funding education, with 1% each to be set aside for problem gambling programs and youth sports.

Five-year horizon predicted

One expert in gambling law, Daniel Wallach, predicted that iGaming would be up and running in New York within five years.

“Sports betting is receiving a lot of the attention now, but if casinos have already been established and you have online sports wagering and daily fantasy sports contests, how much of a leap is it really to just go to the next level, which is online casino games?” Wallach said. “New York’s proximity to New Jersey and the competition for gambling dollars and for customers is going to incentivize New York to try to beat what New Jersey’s doing, or at least have what New Jersey has.”

In January, New Jersey’s online casino operators reported a record $137.8 million in monthly gross gaming revenue. Typically, casino games provide more reliable revenue and higher margins than sports betting. New Jersey reported $1.37 billion in GGR from online casino games in 2021 compared to $815.8 million from online sports gambling. That amounted to $205.2 million in taxes for the state, compared to $96.2 million collected from online sports wagering.

Addabbo said it’s too early to determine what the tax rate would be for either iGaming or for brick-and-mortar casinos yet to be approved in the downstate area of the state. The 51% rate on mobile sports gambling is tied with New Hampshire for the highest such rate in the country.

Addabbo said he would be in favor of setting the licensing fee for downstate casinos at a minimum of $500 million, which would guarantee $1.5 billion in tax revenue whenever those casinos begin operating. The casinos could be incentivized to offer up such massive fees in part by giving them a foothold in iGaming.
New York does not need a constitutional amendment for iGaming if an operator’s servers are situated in a land-based casino.

“I’ll refer back to the sanctioned Spectrum Gaming Group study, which did say a minimum license fee should be set at least at $500 million and go upwards from there,” Addabbo said.

By Katie Kohler