How Big A Bite Will New York Take From New Jersey's Sports-Betting Pie?

January 21, 2022
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This month’s blockbuster debut of online sports betting in New York is raising questions about whether neighboring New Jersey is going to lose market share comparable to 2006 when Pennsylvania casinos ravaged brick-and-mortar properties on Atlantic City’s Boardwalk.

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This month’s blockbuster debut of online sports betting in New York is raising questions about whether neighbouring New Jersey is going to lose market share comparable to 2006 when Pennsylvania casinos ravaged brick-and-mortar properties on Atlantic City’s Boardwalk.

Data compiled by GeoComply, the geolocation provider, revealed that 9.3 percent of online bettors in New York’s first week of operations previously wagered in New Jersey, but almost 88 percent are brand new to the regulated market.

Most of these New Jersey-turned-New York sports bettors appear to be clustered on the border between the two states.

That means at least some New York gamblers who used to make the short drive or train ride across the state line to bet in New Jersey are staying home, so far.

“These patrons may be lost or their gambling activity split between the two states depending on the incentives offered by individual sportsbooks,” said Jane Bokunewicz, director of the Lloyd Levenson Institute at Stockton University near Atlantic City, New Jersey.

But as a pioneer in internet gaming and online betting with some structural advantages, New Jersey always will have an edge on New York, according to Bokunewicz.

“With less of a revenue tax burden than New York, New Jersey may be able to stay in the lead,” she said.

As Laurence J. Peter, a Canadian educator who formulated the Peter principle, once said, “America is a land of taxation that was founded to avoid taxation.”

The tax rate in New York on sports wagering revenue is the nation’s highest — 51 percent.

New Jersey’s effective tax rate is 9.75 percent for retail sports betting and 14.25 for online wagering. In theory, that is an obvious incentive for sportsbooks active in both states to encourage bettors to instead place their wagers in New Jersey, where the lower tax burden should also allow for more flexibility in terms of sign-up and retention bonuses for customers.

VIXIO GamblingCompliance forecasts New York sports-betting revenue of up to $851m this year, meaning the Empire State could surpass New Jersey’s 2021 revenue of $816m and even move past its neighbour as the number one U.S. market if New Jersey’s growth stalls due to the added competition.

Projecting the impact is further complicated when trying to take into account the inevitable impact of the pandemic.

“In the last two years, I think people living in New York — even those who had been travelling to New Jersey and betting — have been staying home more because of the pandemic,” said Marc Edelman, a law professor at Baruch College in New York City who frequently writes about the gaming industry.

“But at the same time, online sports betting in New Jersey has continued to soar,” Edelman said. “So I think the impact of online betting in New York is likely to be de minimis in New Jersey.”

Even after almost 16 years, brick-and-mortar casinos in Atlantic City have yet to recover from cannibalization resulting from competition in another neighbouring state, Pennsylvania.

Atlantic City casinos reported traditional gaming revenue of $2.55bn last year, less than half their peak in 2006.

However, since Pennsylvania launched internet sports wagering operations in 2019, New Jersey has continued to lead the nation in online betting revenue by a wide margin.

Taxes again might be a factor, with Pennsylvania’s 36 percent headline rate on internet wagers more than double New Jersey’s.

“The action in New York probably stabilises the [New Jersey sports-betting] market, meaning slow growth,” said Michael Busler, a professor of finance at Stockton University.

Barbara DeMarco, a New Jersey gambling lobbyist who also has worked in Pennsylvania, discourages comparisons between New York and Pennsylvania and their impact on the New Jersey market.

“It’s like apples and oranges -- the comparison,” DeMarco said. “It's a different demographic, differing geography and there are more people (in New York) inclined to gamble.”

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