How New York Will Challenge New Jersey Online Sports Betting Supremacy

Written By David Danzis on January 11, 2021 - Last Updated on January 12, 2021
New York sports betting

The No. 1 contender to New Jersey’s online sports betting dominance finally appears ready to enter the game.

After dismissing the idea for the better part of two years, New York Gov. Andrew Cuomo announced his support of online sports gambling last week. It was one of several policies included in the governor’s annual budget presentation as a way to make up state revenue shortfalls from the coronavirus pandemic.

“New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis,” Cuomo said in a statement to the Daily News.

The governor does not have to look very far for a successful online sports gambling market to convince lawmakers in Albany that taxing legal wagers would help replenish state coffers.

New Jersey will exceed $5 billion in total online sports wagers for 2020, generating more than $40 million in taxes for the state in the calendar year. 

December numbers will be released on Jan. 13.

Will New York overtake the online sports betting leader?

Most industry analysts believe that the Empire State’s online sports betting market will surpass New Jersey’s. 

“Gov. Cuomo’s embrace of mobile sports betting immediately positions New York to soon lead all other states and generate significant revenue for state coffers,” Sara Slane, an industry consultant and former official with the American Gaming Association, told the Associated Press. “New York, with a population of nearly 20 million, dwarfs any other state with legal betting and should have no problem regularly topping $1 billion a month in wagers.”

The Garden State was an early adopter of online sports betting and quickly became a standard-bearer.

Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University, said, “it was inevitable that other states would follow, especially after seeing New Jersey’s success.” New Jersey was aware that competition would eventually arrive.

“As the market for sports betting continues to develop and expand both within New Jersey and in neighboring states, New Jersey could lose ground in terms of market share, but it will be far from out of the race,” she said. “Sports betting will continue to contribute significant tax revenue to the state even if not at the same levels we’ve been seeing given both New Jersey’s near-monopoly on East Coast online sports wagering and the pandemic.”

 Business has been good for NJ

New Jersey lawmakers included online tax rates when they legalized and regulated sports betting in the spring of 2018. The first online operator, DraftKings Sportsbook, started taking wagers that August and eight others followed suit by the end of the year. 

New Jersey collected just under $7 million from a 13% tax applied to online sports betting revenue in 2018. Almost 63% of the total sports wagering handle that year was from online action.

In 2019, 84% of the nearly $4.6 billion statewide handle were bets placed via NJ sports betting apps. New Jersey collected more than $31.8 million in taxes from online sports betting revenue.

With Atlantic City casinos and New Jersey’s racetracks closed for part of 2020, taxes from iGaming and online sports betting helped to offset losses. New Jersey collected $39.2 million (through November) from online sports betting. Nearly 92% of the state’s $5 billion sports handle was from online wagers.

Ironing out NY sports betting details

Even as impressive as New Jersey’s tax collections from online sports betting are, Cuomo sees larger numbers for his state. Rather than allow casino operators to conduct online sports betting, Cuomo wants a monopoly operator to run the show and share revenue with the state.

“And I’m not here to make casinos a lot of money. I’m here to raise funds for the state. So we have a different model for sports betting,” he said.

New York state lawmakers, however, do not agree with the governor’s approach. A bill introduced Thursday would allow four commercial casinos and three tribal operators to license two skins each. The bill proposes a tax rate of 12% for online sports betting revenue.

A financial summary of the bill estimates $79 million annually for the state. Cuomo’s budget director suggested that a single-operator system could generate $500 million per year.

Tax collections could drop

Should New York launch an online sports betting market, the state of New Jersey would see tax collections drop.

A sizable percentage of the online sports betting market includes New York residents who are currently crossing state borders to bet in New Jersey. A representative for FanDuel Sportsbook (New Jersey’s most profitable sports betting operator) estimated that 25% of online customers hail from New York. The state’s second-largest operator, DraftKings Sportsbook, did not provide a figure, but it would be reasonable to assume the percentage is comparable.

“The pent-up demand for legal sports betting in New York, and throughout the east coast, has led many New Yorkers to cross state lines for the purpose of wagering with New Jersey sportsbooks. The (FanDuel) sportsbook at the Meadowlands (Racetrack) has perhaps benefitted most from this phenomenon,” Bokunewicz said, before noting that one retail location grosses more than the eight Atlantic City casino sportsbooks combined. “This is an indication of the strength of the New York market.”

Because states such as New Jersey and Pennsylvania have already set up successful regulatory models, New York’s rollout of an online market should happen fairly quickly, she said. But, even with an aggressive launch by New York, the impact to New Jersey may not be immediate.

“Consumers have developed a relationship with New Jersey sportsbooks and may need at least a little persuasion to change over to New York-based books,” Bokunewicz said. “This transition period may be shortened of course by those operators, such as market leaders DraftKings and FanDuel, which will likely operate in both states. These operators could make the transition between states virtually seamless for their established customer base.”

Photo by AP/Julio Cortez
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David Danzis

David Danzis is the lead writer for PlayNJ. He is a New Jersey native and honors graduate of Rutgers University. As a newspaper reporter for the New Jersey Herald and Press of Atlantic City, David earned statewide awards for his coverage of politics, government, education, sports, and business. Today, he is PlayNJ’s Atlantic City “insider” and gaming industry expert on casinos, sports betting, and online gambling. David lives in Atlantic County, NJ with his wife and two children.

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