In 1992, Congress banned sports gambling outside of Nevada, Delaware, Montana and Oregon with the passage of the Professional and Amateur Sports Protection Act. Over the last couple decades, sports betting has grown into a massive illegal industry, which experts estimate to be $100 to $200 billion nationwide per year. For example, it is estimated that approximately $4.8 billion was bet on the 2018 Super Bowl alone—97% of which was gambled through unlicensed bookmakers or offshore sportsbooks.

In December 2017, the United States Supreme Court heard arguments in Christie et al. v. NCAA et al. and New Jersey Thoroughbred Horsemen's Association Inc. v. National Collegiate Athletic Association et al. A decision by the Supreme Court in these cases could effectively overturn the Professional and Amateur Sports Protection Act, allowing the states to enact their own laws legalizing sports betting, and thereby throwing a serious curve-ball at this massive black-market.

New York’s Stance on Sports Betting

In light of the decision by the Supreme Court in the months to come, the New York State Senate Committee on Racing, Gaming and Wagering held a public hearing on January 24 to consider the potential for opening the state to legalized sports betting. The panels featured speakers from the National Basketball Association, the New York Racing Association, the New York Thoroughbred Horsemen Association, New York Thoroughbred Breeders, Inc., Sportradar, Genius Sports, William Hill US, Tioga Downs Casino Resort, the New York State Gaming Association and the New York Council on Problem Gambling. Despite small differences in opinion on what types of sports wagers should be allowed and how the industry should be governed, one thing seemed clear throughout the hearing: the question was not should New York allow sports betting, rather the question was how New York should regulate sports betting.

If such is the case, and assuming the Supreme Court determines the Professional and Amateur Sports Protection Act is unconstitutional, the next question logically follows: what can New York taxpayers and corresponding municipalities expect from the legalization of sports betting?

Potential Municipal Impacts

Over the past several years, changes in the State Constitution allowed New York to license the private sector casino development of three commercial casinos in upstate New York. However, since opening, several of the commercial casinos have undershot the first-year economic projections set when applying for operating licenses with the state. As noted by the General Manager of Tioga Downs Casino Resort during the hearing on January 24, sports betting could assist casinos in “meet[ing] the gap of the forecasted versus actual revenue deficiencies we’ve seen.” Nonetheless, closing such gaps for the casinos is not the only economic incentive at play here.

Assuming casinos act as the administrators of any legalized sports betting within the state, such sports betting has the potential to contribute substantially to the pay-outs that municipalities and towns receive from casino revenue. Under the New York Gaming and Economic Development Act of 2013, 80 percent of casino gaming revenue is applied statewide for school aid and property tax relief. The remaining 20 percent is split, 10 percent to the host municipality and county, and 10 percent to counties in the regions established by the Act based on population.

While estimates of the size of the sports betting market are unclear because the state has no way of tracking the activity in the black market, experts have estimated that the sports betting market in New York alone has a value of $4 billion to $19 billion dollars.  The State and local municipalities could share in these new revenues through a tax.  The tax revenues could be hundreds of millions of dollars. Such projections are in comparison to revenue generated in Nevada, which was estimated at the hearing on January 24 by William Hill US as $250 million a year, at a tax rate of 6.75%.

Nevertheless, while awaiting a decision by the Supreme Court concerning the constitutionality of the Professional and Amateur Sports Protection Act, municipalities and counties should be aware of this potential new avenue of revenue: legalized sports betting.