As the number of states with legalized sports betting options continues to grow, US sports betting revenue for the year 2021 is expected to reach an all-time high.
On the flip side, the phenomenal growth of the sports betting industry nationwide and the introduction of legalized sports betting in New York, in particular, could negatively impact sports betting revenue in New Jersey.
What does sports betting revenue encompass, and what is contributing to its continued growth?
Sports betting revenue represents the amount of money that regulated sportsbooks have left as profit after deducting the payouts on winning bets and other expenses. This figure is much less than the handle, which is the total amount bet on sports. States collect taxes only on the revenue, not on the total amount wagered.
According to a Jan. 7, 2021 article on ThePressofAtlanticCity.com, a report just issued by VIXIO Gambling Compliance projected that before this year is over, sports betting revenue in the US could reach $2.6 billion to $3.1 billion.
These figures represent a 100 percent increase of the $1.55 billion the same company had estimated would be the 2020 sports betting revenue. The report also stated that by 2025, total US sports betting revenue could climb as high as $10 billion.
These predictions are based in part on the expectation that at least six additional states and possibly as many as 14 will legalize or expand sports betting in 2021. Along the same line, many other analysts have projected that by the end of this year, sports betting will be legal in nearly half of the United States.
Where New York State stands with regard to legalized sports betting
One of the key states on the list of those expected to legalize sports betting in 2021 is New York. Gov. Andrew Cuomo, a previous long-time outspoken opponent of legalized mobile sports betting, has recently reversed his position. He now sees mobile sports betting as a viable way to maximize state tax revenue and openly supports it in his state.
This complete about-face in attitude is reflected in the following statement that Gov. Cuomo made recently:
“At a time when New York faces a historic deficit due to the COVID-19 pandemic, …[many] New York residents travel out of state to make online sports wagers or continue to patronize black markets.”
“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 revenue here at home, which will only strengthen our ability to rebuild….”
Cuomo asked the NY State Gaming Commission to solicit proposals for selecting and licensing a sports operator or platform to offer legalized state-run online and mobile sports betting.
Cuomo favors a single operator that would exclude any casinos. However, a bill has been introduced that would allow four commercial casinos and three tribal operators to take sports bets.
If state legislatures and the governor can’t come to an agreement soon, that will prolong the amount of time needed for legalized sports betting in New York to be up and running.
How might New York’s expected entry into the sports betting market impact the industry as a whole?
Some gambling operators with interests in New Jersey think that New York’s entry into the legalized sports betting market will be very beneficial to both the industry and the economy.
For example, Yaniv Sherman, head of commercial development at 888 Holdings, said that he would welcome a possible full-scale entrance of New York to the sports betting market.
“New York has always been the critical, strategic, and much-anticipated component of any US online gambling agenda,” Sherman stated, “and it represents one of the top three states in terms of economic potential.”
Adam Greenblatt, CEO of BetMGM, said that his company looks forward to entering New York’s expanded market. He commented that the legalization of sports betting there “has the potential to bring leaking tax dollars back to New York from offshore books and nearby states.”
Sara Slane, a gambling analyst and former official with the American Gaming Association, believes that New York could soon become a “top-tier state in the sports betting market” and “soon lead all other states.”
Slane added that “New York, with a population of nearly 20 million, …should have no problem regularly topping $1 billion per month in wagers.”
What about New Jersey?
Meanwhile, New York’s likely emerging presence as a major player in the online and mobile sports betting industry doesn’t bode well for New Jersey.
The position that New Jersey currently holds as the undisputed online sports betting revenue leader represents the culmination of years of determination, hard work, and hard-fought legal battles. Understandably, the success New Jersey has achieved as a result has not gone unnoticed by other states. It has propelled one state after another to introduce legislation to get the ball rolling so that their government could reap the tax benefits that legalized sports betting would generate, too. Sports betting in New Jersey became the model that these other states wanted to emulate.
Last year NJ sportsbooks took in over $5 billion in wagers and generated more than $40 million in taxes for the state. But whether or not New Jersey will be able to produce similar results in 2021 remains to be seen. Once sports betting becomes legal in New York, some decline in NJ sports betting revenue is inevitable.
Sports betting will continue to contribute sizable tax revenue for the State of New Jersey, just not as much as before.
Jane Bokunewicz, coordinator of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University, had this to say:
“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. 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.”
According to a Jan. 11, 2021 article published on PlayNJ.com, some of the inevitable crossover of bettors in New York from New Jersey sportsbooks to local sportsbooks might not be immediate. That would be especially true for those who have already established a good relationship with at least one New Jersey sportsbook that has become their go-to place to bet.
On the other hand, the two biggest NJ sportsbook operators, FanDuel and DraftKings, will almost certainly plan to open in New York, too. When the time comes, they can make it very easy and also very enticing (i.e., offer special bonuses) for any customer who wants to switch from New Jersey to New York to do so quickly and seamlessly.
NJ Online Casino will continue to follow this important developing story on the pending legalization of online and mobile sports betting in New York and other new jurisdictions and the impact on New Jersey sports betting revenue.