NY, Florida Have Sports Betting Deals, But Drawbacks Remain
As the sports gambling industry digests what has happened in New York and Florida this month, it may be reminded of the old saying, “Be careful what you wish for — because you may get it.”
With mid-sized and smaller jurisdictions the early movers to sports gambling since the Professional and Amateur Sports Protection Act was upended in May 2018, sports betting operators have been longing for the larger states to join the party, most notably the Big Four.
By population, that’s California, Texas, Florida and New York, in that order. We have to put an asterisk by New York because it actually does have retail sports betting -- but that’s confined to a handful of upstate casinos, making it de facto non-existent for most New Yorkers. Without the convenience of online sports betting, New Yorkers have mainly traveled to New Jersey and Pennsylvania (or stuck with offshore operators) to get their sports bets down.
Each of those four larger states, for its own set of circumstances, has been sluggish in advancing toward widespread sports gambling. That is, until the last few weeks when first New York and then Florida made significant progress in that regard, albeit following torturous routes with the eventual results still murky.
Sports Betting Controlled by One Entity
While the two models are vastly different, there is a fundamental commonality. In both cases, sports betting is controlled by a single entity. In New York, it’s the state lottery. In Florida, it’s the Seminole Tribe.
In examining each model, there appears to be more clarity in the Florida scheme (although legal minds are throwing shade on its state constitutionality). In Florida, computer servers for sports betting would be located on Seminole property, presumably where all or some of the Seminoles’ seven casinos reside.
Commercial gambling businesses, known in Florida as the “pari-mutuels” (card rooms and race tracks), would be allowed to offer sports gambling as well, but they have to send their business through the Seminoles’ servers and pay a fee of 40% of revenues.
The complex arrangement is the product of negotiations between Florida Gov. Ron DeSantis’ administration and the Seminoles that tries to check off a lot of boxes, mainly allowing the state to keep getting a healthy cut of Seminole gambling money ($2.5 billion guaranteed over the next five years and $6 billion through 2030).
The compact also tries preserving those traditional commercial pari-mutuel gambling businesses and allowing the Seminole Florida gambling empire to keep humming along, by adding games such as craps and roulette, new facilities on its Hard Rock reservation, and creating sports wagering “partnerships” with the pari-mutuels. All of this is proposed without requiring voter approval, always an iffy proposition. The Florida legislature reportedly does get to put its stamp on the deal in a special session next month.
Competition Proves Beneficial
The sports gambling industry that has emerged in America over the past nearly three years, since the U.S. Supreme Court drove a stake through the heart of PASPA, has spawned its own lineup of market-leading franchises: FanDuel, DraftKings, BetMGM and William Hill. Then there’s the next operator tier of Rivers/Rush Street, Barstool, PointsBet, Wynn and others.
In some jurisdictions, that competition has produced a lively betting environment for customers and generated meaningful tax revenue. Meanwhile, in December, Hard Rock International launched Hard Rock Digital to be the exclusive Hard Rock and Seminole Gaming vehicle for interactive gaming and sports betting, globally. So exactly how other sports wagering companies, or how many of them, will fit in Florida is unclear.
New York has had its own drama over the last month or so with the state legislature favoring a more free-market approach to online sports gambling — similar to the highly-successful New Jersey model with a lengthy list of competing operators — but running into hardline opposition from Gov. Andrew Cuomo who has insisted that the state lottery be the controlling hand.
Cuomo Plan is Problematic
Cuomo, who developed a grudging tolerance for online gambling only after the COVID-19 pandemic crushed his state’s budget, argued the state makes more money with a lottery-controlled system despite dubious lottery-run sports gambling results in places such as New Hampshire and Washington D.C.
However, in New York, the governor has a strong voice in such matters and so Cuomo mostly prevailed. Under the Cuomo plan, the lottery will take bids from online gambling operators (DraftKings, FanDuel and the like) and pick a couple of winners. In turn, the winning bidders would then get to take on additional skins; it’s a head-scratching concept no one has yet quite figured out.
The challenges of adopting sports wagering and the objectives of adding that type gambling have been different in New York and Florida, aside from the ever-present common goal of raising cash for government coffers. But assuming the inevitability of where these two states are headed in sports wagering, the direction they’re taking should raise concerns for both operators and customers.
The bottom line is less competition. And that’s bad news for everyone, including the state governments.
What About the Customers?
Less competition means less attractive everything, especially odds and promotions. That translates to fewer customers. Given the already formidable competition from offshore sports gambling operators (who still dominate U.S. online sports gambling), state governments should be trying to create environments where sports wagering operators have some room to compete against the offshore companies. Less competition works against that objective.
So, while getting New York and Florida to the finish line on sports wagering will produce impressive numbers in terms of legal sports wagering handle in the U.S., the way it’s going to roll out in those two states may not be as helpful as hoped to the bottom lines of sports gambling operators.
Even more problematic, the sports gambling schemes cooked up in New York and Florida will likely not create environments where sports wagering operators can convince the savvy and most prolific sports bettors, who have grown comfortable with their offshore bookmakers, to switch to the legal market.
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