Online-betting windfall stirs debates

By MAURY THOMPSON
Contributing writer

 

Two years after New York legalized mobile sports betting, it appears the biggest winner by far has been the state government.

From early 2022 through the beginning of this year, Albany raked in more than $1.55 billion from its 51 percent tax on gross revenue from online betting.

“Over the last two years, New York is the clear leader in providing responsible entertainment for millions while bringing in record-shattering revenue for education, youth sports, and problem gambling prevention,” Gov. Kathy Hochul said in a Jan. 12 news release marking the two-year anniversary of the program.

States began legalizing mobile sports betting after the U.S. Supreme Court struck down a federal ban on state-sanctioned sports betting in 2018. Although New York’s entry into the industry in 2022 was comparatively late, the state has since vaulted into the third-ranking position for sports betting handles, trailing only Nevada and New Jersey among the 38 states that allow it, Hochul boasted.

But critics say the industry has been a Trojan horse that has ushered in an increase in gambling addiction while setting a dangerous fiscal precedent.

“It comes with a cost,” said state Assemblyman Matt Simpson, R-Lake George, who voted several years ago against legalizing mobile sports betting in New York.

In the two years since New York got started, Massachusetts and Vermont also have entered the industry.

Massachusetts launched mobile sports betting last year with a 15 percent tax, purposely set lower than many other states with the intent of making up for the state’s comparatively late start, according to reporting by Boston public radio station WBUR.

Vermont, which just got into the game this year and was the last state in the Northeast to do so, collected $1.1 million in January and $731,000 in February, the first two months of operation, from its 31.7 percent tax on mobile sports betting revenue.

State Sen. Irene Wrenner, a Chittenden County Democrat, said legalizing mobile sports betting in Vermont was not controversial.

“Some of us had misgivings in that this was taking a step toward gambling, which Vermont has traditionally been against,” she said.

But Vermont was losing revenue to other states, because Vermont residents were able to place online bets in states where mobile sports betting already was legal, she explained.
“The money pressures worked on a lot of us,” Wrenner said.

Vermont legislators did specify that about $500,000 a year of the new revenue will be used to increase mental health services for problem gamblers.

Calls for tougher regulation
At least one area lawmaker says the government needs to do much more to confront the effects on online betting on people who are prone to compulsive gambling.

U.S. Rep. Paul Tonko, D-Amsterdam, whose district covers Saratoga County, says mobile sports betting has caused a public health crisis that necessitates structural change, not just increased counseling.

The instantaneous nature and personalized offering of betting opportunities sets mobile sports betting apart from other forms of gambling, said Tonko, who is preparing to introduce legislation under which federal regulators would curtail “predatory” advertising practices in the industry.
“In short, we are dealing with a massive public health crisis dealing with a known addictive product,” he said at a virtual press conference in April.

Tonko, who chairs the House Addiction Treatment and Recovery caucus, said there were 270,000 calls to the National Council on Problem Gambling hotline in 2021, the most recent year for which statistics are available. That was an increase of 45 percent over the previous year — and that was before New York, Massachusetts and Vermont began offering state-sanctioned sports betting.

Nationwide, an estimated 7 million people are addicted to gambling, and that estimate is probably low, Tonko said.

Some of the increased addiction may be due to an increase in gambling in general, as mobile sports betting does not appear to be cutting into the revenue of other forms of legalized gambling. For example, the Belmont Stakes, which were run at the Saratoga Race Course in June, had a record all-sources handle for a non-Triple Crown year, according to Gaming Today, a newspaper that covers the gambling industry.

“There’s not been a decline in people who want to bet on the horses,” said Assemblywoman Carrie Woerner, D-Round Lake, who serves on the Assembly Committee on Racing and Wagering.

Thirty of the 36 states with casino gambling saw increased casino revenue in 2023, including New York, which had an 11.6 percent increase to nearly $4.2 billion, according to the American Gaming Association, a casino industry trade group.

As of June 24, the final language of Tonko’s proposed legislation, to be dubbed the SAFE Bet Act, was still being drafted, and it had not yet been formally introduced. But Tonko outlined the basic features at his April 24 press conference:
* Prohibit advertising of free or bonus bets and instant specialized bet options, and restrict advertising to hours when children and young adults typically are not watching television. “Advertising should be limited simply to brand awareness, rather than inducing betting and promotions,” Tonko said.

• Require operators to limit customer deposits in gambling accounts to five times in any 24-hour period. Require operators to refuse to accept deposits via credit card -- and to conduct an analysis of frequent customers’ ability to pay. Tonko compared this provision to laws that prohibit bars from selling alcohol to someone who is visibly intoxicated.

• Prohibit mobile sports betting operators from using artificial intelligence to personalize betting offers to customers. Tonko said one of his biggest concerns is the industry’s “use of massive super-computing power and artificial intelligence to deliver thousands of instant micro-bets that are carefully tailored to each customer’s gambling profile.”

• Direct the U.S. surgeon general to study the impact of mobile sports betting on public health.
Tonko said his legislation would not prevent people from placing mobile sports bets but is intended to require companies that handle these bets to act responsibly.

Three officials of the Public Health Advocacy Institute at Northeastern University also spoke at the April press conference and endorsed Tonko’s proposal.

“We hear the term ‘gambling revenue.’ Every dollar of revenue … represents a dollar of loss to the public,” said Harry Levant, a policy adviser to the institute who is also a gambling therapist at Ethos Treatment Center at Philadelphia.

 

Revenue vs. addiction
Among area state legislators in New York, no one has called for the breadth of oversight Tonko is pushing at the federal level, though some remain skeptical of the overall benefits of online sports betting.

Simpson, the Warren County assemblyman, said he knows people who enjoy placing an occasional online sports bet, but he also knows others who’ve become addicted.
“I have seen the ugly side too,” Simpson said.

And aside from the addiction factor, he argued that it’s not fiscally prudent for the state to rely on revenue from increased gambling to cover its spending growth.
“You have to question,” he said.

Woerner, who co-sponsored a 2021 bill to allow state-sanctioned mobile sports betting, offered a more laissez-faire view.

“I take kind of a libertarian approach to questions of gambling,” so long as there are measures to address addiction, she said. “It’s really a matter of personal choice.”

Woerner cautioned, however, that even though the infusion of new revenue from sports betting has enabled the state to provide record school funding, gambling revenue will not increase at the same rate forever. Recognizing that, she said, state officials are exploring how to allocate the most funding to school districts that have the least ability to raise taxes from the local economy.
Industry officials stress that the expansion of gambling has created jobs and helped cash-strapped state governments.

“As gambling expands, more communities than ever are now benefiting,” said Bill Miller, president and chief executive officer of the American Gaming Association, a casino trade group, in the association’s recent annual report. “We are proud to create jobs across the country, provide world-class experiences that offer safe alternatives to the pervasive illegal gambling market, and generate tax revenue to support critical public projects.”

In New York, sports betting generated $103.7 million for education in the most recent month for which figures were available, ending May 24, and $97.3 million for the previous month, according to the state Gaming Commission.

 

Debate over a federal tax
Among other proposed sports gambling legislation at the federal level, Rep. Marcus Molinaro, R-Catskill, is co-sponsor of a proposal to repeal a 0.25 percent federal excise tax on sports betting and for-profit lottery handles. The tax revenue goes into the general fund and is not dedicated for any specific purpose.

Rep. Dina Titus, D-Nev., the repeal effort’s principal sponsor, has said the tax makes U.S. gambling operators less competitive with unregulated off-shore online gambling operators. The proposed legislation, HR 1661, had nine co-sponsors, six Republicans and three Democrats, as of June 22. Senate companion legislation had not been introduced.

Another proposal, introduced by Rep. Andrea Salinas, D-Ore., in the House, and Sen. Richard Blumenthal, D-Conn., in the Senate, would dedicate 50 percent of the revenue from the federal excise tax to a block grant program to states for gambling addiction treatment — and to establish a National Institute of Drug Abuse program to study gambling addiction.

“Unlike alcohol and drug addiction, there are currently no federal funds dedicated solely to helping prevent problem gambling,” Salinas said in a news release.

Titus, the Nevada representative, opposes the Salinas-Blumenthal bill and has argued that gambling operators and states already have extensive initiatives to combat problem gambling.
Seven sports betting operators recently collaborated to establish the Responsible Online Gaming Association, a trade organization for research, education and marketing, and to operate an independent data clearing house and gambling operator certification program. The seven companies collectively provided $20 million for the first year of operation.

Jennifer Shatley, the executive director of the new association, most recently was president of Nevada Council on Problem Gambling. Efforts to contact the organization for comment were unsuccessful before the deadline for this issue.

At the state level, the New York Senate passed legislation in early June to allocate 1 percent of the state’s sports betting excise tax revenue to gambling addiction counseling and prevention initiatives.

“While I recognize that some may lack enthusiasm for mobile sports betting, I hope everyone can appreciate that many education services and youth sports have sustained because of the additional revenue from mobile gaming,” said Sen. James Abbaddo Jr., D-Queens, the bill’s sponsor.

The legislation did not pass the Assembly.
In Massachusetts, there is discussion in the Legislature about banning sports gambling operators from cross-promoting betting at retail stores and restaurants the operators own, Gaming Today reported.