The Citizens Budget Commission (CBS) has produced a new report – Hold Your Bets – which offers state leaders some guidelines to consider as they decide whether and how to expand sports betting in New York.

It kicks off with a recommendation that revenue estimates should be conservative. “While a new source of revenue would be welcome, the state should estimate conservatively revenue benefits from sports betting,” it said.  “Since sports betting has been illegal, it is difficult to predict how much of the illicit activity will transition to the legal market and how many new participants will engage.  Furthermore, behavior will vary from state to state or in areas within states based on demographic factors such as adult population, per capita disposable income, and ease of access to gaming markets.”

Previous estimates on other types of gambling revenues in New York have been overly optimistic noted the CBS.  On November 5, 2013 New York State voters approved a constitutional amendment to expand casino gambling, and subsequently four commercial casinos were opened (Tiago Downs in Nichols, del Lago Resort and Casino near Waterloo, Rivers Casino and Resort in Schenectady, and Resorts World Catskills).

Said the report: “In New York State Fiscal Year 2017-2018 the casinos, with the exception of Resorts World Catskills which was not open until late in the year, generated gaming taxes of $112m. However, these results were far short of projections. Resorts World Catskills was downgraded by Moody’s Investors Service this past June and reported losses of $58m for the six month period ending June 30, 2018. Many critics attribute the poor performance of the casinos to the oversaturation of the gaming market due to the number of casinos that have opened in the northeast.”

 The report cautions that taxes should be designed thoughtfully in a competitive marketplace.  Initial tax rates on GGR vary widely, and the economic impacts are uncertain. “Lower tax rates would arguably enable operators to spend more on marketing and customer service, invest more in technology, and potentially set odds that are more attractive to bettors,” it advised.  “Conversely, setting higher GGR tax rates may result in fewer operators willing to enter the local marketplace, less investment in infrastructure and marketing, and less attractive odds.  Ultimately this may result in fewer people transitioning from illegal to legal sports gambling.”

 CBS added that sports betting’s potential impact on other gambling revenues should also be considered.In addition to falling short of revenue expectations, the recently opened commercial casinos in upstate New York have also taken a large share of revenue from competitors including racinos at Finger Lakes Gaming, Vernon Downs, and Saratoga Springs that feature slots and electronic table games.  The trend of newcomers taking share from incumbents is consistent with what has been occurring in other gaming markets, particularly in the north eastern portion of the United States.

It concluded: “Sports betting in New York presents an economic opportunity. In addition to revenues from taxing sports betting, there are potential economic benefits from job creation, including additional income and payroll, and sales taxes.  Nationally, the estimated state and local benefit is estimated at $3.4bn, of which $254m is attributable to New York.  Furthermore, the demand for illegal sports betting could decline as bettors shift to a legal alternative, generating law enforcement savings as the costs associated with investigation and prosecution of illegal activity decline.”