State collections from the taxes on mobile sports betting totaled $727.4 million in State Fiscal Year (SFY) 2022-2023 and have continued to grow in the first quarter of the current fiscal year, according to a report by State Comptroller Thomas P. DiNapoli. With the legalization of mobile sports betting, the New York State Gaming Commission noted a 26% increase in problem gambling-related calls to the Office of Addiction Services and Supports (OASAS) from 2021 to 2022.
“Gaming has significantly expanded in the state in the last several years,” DiNapoli said. “With the ease and 24/7 availability of mobile betting apps, problem gambling and addiction are poised to increase. More attention should be devoted to understanding the implications of mobile sports betting, particularly on young New Yorkers.”
From SFY 2011-12 to 2022-23, state revenues from lottery sales and taxes on gaming revenues increased by 69.5%, growing from $2.8 billion to $4.8 billion. The increase is primarily from the implementation of new forms of gaming rather than from increased consumption of existing ones. New York is now among eight states that offer the most forms of gaming nationwide.
State revenues from video lottery terminal (VLT) facilities, casinos, and tribal-state compacts in SFY 2020-21 were less than half of those collected in SFY 2019-20 due in large part to gaming facilities being closed for five months because of the COVID-19 pandemic. Two years later, collections from the taxes on gaming revenues of the commercial casinos have yet to return to SFY 2019-20 levels. In addition, New York’s gaming industry has not recovered from 2020 losses of approximately 3,400 jobs. Employment in 2022 was nearly 20% lower than its pre-pandemic level.
In SFY 2022-23, the state’s $4.8 billion in gaming revenues comprised 3.6% of total state operating funds spending. While nearly 95% of the revenues were used for education purposes, they averaged just over one dollar of every eight state dollars spent on education over the past 12 years.
Mobile Sports Betting
Mobile sports betting in New York was authorized in the SFY 2021-22 Enacted Budget and went live in January 2022. With a tax rate of 51% on gross gaming revenues, New York joins Rhode Island and New Hampshire in levying the highest rate in the nation. In SFY 2021-22, mobile sports betting generated $360.7 million for the state, far more than the $99 million initially projected. The $727.4 million in collections for the first full year of mobile sports betting in SFY 2022-23 was double the projection of $357 million. The higher collections were due primarily to the number of licenses issued to mobile sports wagering providers and the higher tax rate imposed subsequent to initial projections. Revenues in the first quarter of the current fiscal year have continued to grow, although the state Division of the Budget projects collections will level out, increasing by 6.9% over the next four fiscal years.
Since mobile sports wagering has gone into effect, gross gaming revenue from in-person sports wagering at the state’s commercial casinos has declined, down 45% in SFY 2022-23. Tioga Downs in the Southern Tier saw the steepest fall off of in-person wagering, 58.7%, while Rivers in the Capital Region saw the largest revenue decline at $2.9 million.
Since DiNapoli’s 2020 gaming report, OASAS spending on problem gambling services has increased from about $5.7 million in SFY 2019-20 to over $9.6 million in SFY 2022-23, according to OASAS testimony to the state Legislature.
The legislation authorizing mobile sports betting required 1% (about $1.6 million) of the tax on mobile sports betting revenues to be set aside for problem gambling services in SFY 2021-22. For each successive state fiscal year, problem gambling services will receive $6 million from those revenues.
Research indicates higher rates of gambling problems occur among individuals wagering with a mobile device, enabled by the accessibility, privacy and ease of smartphone use. The Gaming Commission – in conjunction with OASAS – is required to submit annual reports to the Governor and the Legislature on the impact of mobile sports betting on problem gambling. The first annual report, which was issued in April 2023 and updated in June 2023, contained limited data on the impact in the state and demographic information on individuals affected by the addiction. More information and better reporting are necessary to understand the effect of mobile sports betting, particularly on young people and the vulnerable.
Gaming Expansion Continues
The SFY 2022-23 Enacted Budget authorized the creation of three additional commercial casinos to be located in New York City, Long Island, or in the counties of Westchester, Rockland or Putnam. Applicants are required to pay a $1 million application fee, and the winners would pay a $500 million license fee. Other legislative proposals to expand gaming include authorizing online casino gaming and a plan to double the number of VLTs from 1,000 to 2,000 at a casino/hotel on Long Island.
With three new commercial casinos expected, careful analysis should be done to ensure projections of revenues and economic benefits are reasonable and attainable. As was shown in DiNapoli’s recent report Revenue Impact of Commercial Casinos on Upstate Local Governments, the actual revenues received from the four upstate casinos fell significantly short of projections. The four casinos also fell short of their projections that they would create over 4,700 jobs. When all four casinos were fully operational in 2019, jobs in the entire leisure and hospitality industry increased by just under 3,800 in the casinos’ host counties.
With mobile sports wagering, the need to travel to a casino diminishes, as shown in the decline in revenue from in-person sports betting. With proposals to authorize online casino gaming introduced, economic benefits from the casinos could be eroded as foot traffic potentially declines.