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With New York facing a $15 billion budget shortfall from the coronavirus pandemic, online sports betting is viewed as one possible way to inject much-needed money into the state. New Jersey legalized online wagers in 2018, and earlier this month, Governor Andrew Cuomo included an online professional sports betting plan in his executive budget proposal that he claimed would raise $500 million in revenue for the state.

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A single operator runs online sports betting in New Hampshire, Oregon, Rhode Island and the District of Columbia. Overall, sports betting is now legal in more than two dozen states.

But many logistical hurdles remain. Cuomo’s proposal for legalization runs counter to what the Democratic supermajority in the state legislature is pitching. Some authorities are questioning the legality of the whole enterprise. And there are lingering concerns about gambling and addiction, particularly with the number of people sequestered at home and the opportunities that could be suddenly available to lose significant amounts of cash.

“I don’t see the governor’s proposal as workable in New York,” said Assemblyman Gary Pretlow, the chairman of the Committee on Racing and Wagering.

Right now, you can place horse racing bets on your smartphone through an app run by the not-for-profit corporation that oversees horse racing in New York’s three major tracks. Mobile betting for professional sports could theoretically function in a similar way. Currently, the servers for horse betting are located at the racetracks.

In both Cuomo and the legislature's proposals, the servers for mobile sports betting would be situated at places where bets are already taken, like casinos. The major overriding question is how many operators, or “skins,” as they are called in the industry, there will be, and who will get to profit.

Under Cuomo’s proposal, which still needs to be fleshed out further, the New York State Gaming Commission would be directed to solicit bids for a small number of mobile sports wagering operators. The system would be akin to how the state-run lottery functions, with possibly only one or a small number of operators overseeing sports betting. A single operator runs online sports betting in New Hampshire, Oregon, Rhode Island and the District of Columbia. Overall, sports betting is now legal in more than two dozen states.

Robert Mujica, Cuomo’s budget director, said earlier this month that the advantage of the state proposal would be the ability to maximize tax revenue. “The fundamental question is: if you want to support the bottom line for casinos or New York’s students. And the governor’s proposal chooses students,” Mujica told the Wall Street Journal. (An identical statement was sent to Gothamist from Freeman Klopott, a budget spokesman for Cuomo.)

It’s not clear yet what Cuomo’s tax rate would be for his online betting model, though Mujica has asserted that it would be enough to raise $500 million a year. The state legislative proposal, co-sponsored by Pretlow and the chairman of the State Senate’s Racing and Wagering Committee, Joseph Addabbo, puts the number closer to $100 million annually.

At first glance, that would seem to make Cuomo’s proposal the better one, given the potential for serious state budget cuts without new forms of revenue. But lawmakers and some gambling industry insiders aren’t so sure. In New Jersey, which is generally viewed as a success given the number of people who place bets, there are as many as 17 legal online sportsbooks.

New York’s legislature is looking to take a similar approach, believing their proposal has a better opportunity for growth—more operators can lead to more options for consumers and more interest in placing bets. Addabbo calls his legislation “inclusive,” because it would also allow for Native American casinos, casinos on state property, and off-track betting sites to participate.

“Competition bodes better for our residents and will drive up revenues than being a narrow state-run lottery kind of system,” Addabbo argued. “New York finds itself in a very odd position not being a leader. We are outside looking in. New York right now is a three-wheeled car limping along in the right lane. New Jersey and Pennsylvania are speeding by us.”

Bennett Liebman is a government lawyer in residence at Albany Law School who previously advised Cuomo as the deputy secretary for Gaming and Racing. He said the difference between the two models is a question of what is being prioritized: more tax revenue, or a better model, long-term, for consumers and gambling interests?

“It all depends on what you want in your market. If you want what the governor is seeking, which the draft is very general, you are looking for maximum tax revenue, you will give it to one or two groups and you are going to tax them at a very high rate,” Liebman said. “If you are looking to create a robust market to help out casinos and consumers, then you go with, or you are more inclined to go with, the legislative plan.”

Liebman called the Cuomo administration’s $500 million revenue figure for online sports betting “very, very high,” and predicted a few operators would dominate the space in New York, like DraftKings and FanDuel have done in New Jersey. Casinos, racetracks, and online gambling in total generated a little more than $300 million in tax revenue for New Jersey in 2020.

Even if New York reached Cuomo’s projections—let alone the far smaller figure from the state legislature—online sports betting would represent only a minuscule fraction of a state budget that was $177 billion last year. One question hanging over the debate is whether the united front fighting for mobile sports betting in New York—the currently existing casinos, and operators like DraftKings and FanDuel—would crumble if only a small number of them were selected to make money from sports betting.

According to a constitutional amendment passed in 2013, sports wagering in New York is currently allowed only in physical portions of its four existing commercial casinos and other facilities operated by Indian tribes. Cuomo and supporters of online sports betting believe their proposal will meet the requirements of the state constitution by locating the servers for the betting websites at the physical casinos.

Neil Murray, an Albany attorney who has sued to oppose gambling in the state, said there was a “legitimate, serious question” about the constitutionality of online sports betting.

“The problem right now is the constitutional amendment that was passed several years ago does carve out exceptions for gambling at casinos. The operative word is ‘at’ and what does that mean?”

Murray argued the way the amendment was proposed—an economic stimulus for destination casinos that would prevent the proliferation of gambling statewide—contradicts the arguments made for mobile sports betting today. “If you allow online gambling and people can gamble from their living rooms, then of course that destroys the whole purpose on which gambling was authorized on a limited basis to begin with,” he said. “Everybody is counting on collective amnesia.”

Pretlow, the state assemblyman, contended that his bill met the requirements of the state constitution but Cuomo’s would not if it chose to operate like the state lottery. The lottery is regarded as a game of pure chance with no skill involved, allowing it to circumvent a longtime prohibition on gambling in the state.

“The lottery has to be 100 percent chance. The lottery is not gambling,” Pretlow said. “It’s flip a coin, heads or tails, nothing in the middle. I think if the lottery were to handle sports betting, it would lead to a constitutional question.”

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What you need to know about Michigan online sports betting

Michigan regulators have given the green light for online gambling and online sports betting to start at noon Friday.

The Michigan Gaming Control Board announced Tuesday that it approved the first nine casinos and their online platform partners to launch at that time, with additional approvals expected in coming days.

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The Legislature and Gov. Gretchen Whitmer legalized internet gambling and sports betting in December 2019, and regulators spent all of last year devising rules and ways to monitor and license the new platforms.

The minimum age for online gambling and sports betting is 21. Those taking part in sports betting do not need to be Michigan residents, but must be situated within the state's borders when placing bets via smartphone app or computer. Those from Ohio, where online sports betting isn't legal, could therefore use Michigan's new betting apps if they do so in Michigan.

© Charles Krupa, Associated Press DraftKings logo is displayed at the sports betting company headquarters in Boston.

The nine platforms and their associated operators are:

  • FanDuel, for MotorCity Casino
  • BetMGM/Roar Digital, for MGM Grand Detroit
  • Penn Sports Interactive/ Barstool Sportsbook, for Greektown Casino
  • DraftKings, for the Bay Mills Indian Community
  • William Hill, for the Grand Traverse Band of Ottawa and Chippewa Indians
  • TwinSpires, for the Hannahville Indian Community
  • Golden Nugget Online Gaming, for the Keweenaw Bay Indian Community
  • Rush Street, for the Little River Band of Ottawa Indians
  • Wynn, for the Sault Ste. Marie Tribe of Chippewa Indians
Online Sports Betting Us© FanDuel FanDuel is one of several online sports betting platforms that will go live in Michigan

Richard Kalm, executive director of the gaming control board, said the days between Tuesday's authorization and Friday's launch give the online platforms time to do testing and make adjustments. Some platforms, such as FanDuel, DraftKings and BetMGM, have been advertising for weeks and allowing users to sign up, but not place bets.

More: Internet gambling, sports betting launch in Michigan may be just days away

'Online gaming and sports betting will provide the casinos with new ways to engage with customers while the state and local communities will benefit from taxes and payments on wagering revenue,' Kalm said in a statement.

FanDuel's Chief Marketing Officer Mike Raffensperger said that about 90% of the company's users in markets where sports betting is already allowed use FanDuel through its mobile app.

Raffensperger said legalized online sports betting is a good because it brings the activity into the light of day and prevents people from getting outright cheated.

'Frankly speaking, (sports betting) is a marketplace that existed prior to us launching legally,' he said. 'It just happened in (the) black market and the gray market with offshore accounts where maybe you’ll get your money out, maybe you won’t.'

In-person sports betting began in Michigan last March but quickly went dark when the Detroit casinos closed amid the initial surge of the COVID-19 pandemic. The sports betting lounges reopened in the summer, closed again Nov. 18 and have remained open at reduced capacity since Dec. 22.

© scyther5, Getty Images/iStockphoto Man using phone to bet on sports

The tax rate and the tribal payment rate for internet sports betting is 8.4%.

The tax and payment rates paid by the casinos for general internet gambling — not including sports — will range from about 20% to 28%, based on adjusted gross receipts.

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Raffensperger of FanDuel said he believes that online sports betting will not result in the closure of the still-new sports-betting lounges in Detroit's casinos.

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'There's nothing like the experience of a sports book — watching a great game on giant TVs and being there with your friends,' he said. “COVID has made that difficult ... but it’s a wonderful, fun experience.”

Contact JC Reindl:313-222-6631 or jcreindl@freepress.com. Follow him on Twitter@jcreindl. Read more on business and sign up for our business newsletter.

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This article originally appeared on Detroit Free Press: Michigan legal online gambling and sports betting to start Friday