Taxes

New York Reports Gambling Revenues Are Up—And So Are Problem Gambling Calls

Online sports betting in New York added $727.4 million in tax revenues in the state’s fiscal 2022-2023 year—and it looks like the trend will continue into the first quarter of the current fiscal year, according to a report by State Comptroller Thomas P. DiNapoli. But not all news is good news. The New York State Gaming Commission also noted a 26% increase in problem gambling-related calls to the Office of Addiction Services and Supports (OASAS) from 2021 to 2022.

“Gaming has significantly expanded in the state in the last several years,” DiNapoli said. “With the ease and 24/7 availability of mobile betting apps, problem gambling and addiction are poised to increase. More attention should be devoted to understanding the implications of mobile sports betting, particularly on young New Yorkers.”

Gaming Revenues

According to the State of New York, state revenues from lottery sales and taxes on gaming increased by 69.5% over the past decade, growing from $2.8 billion to $4.8 billion. In the most recent fiscal year, those revenues comprised 3.6% of total state operating funds spending.

The lion’s share—95% of the revenues—was used for education. However, the percentages make it sound slightly more dramatic than the dollars involved. By the numbers, those revenues represented just over one dollar of every eight state dollars spent on education over the past 12 years.

The increase in revenues is attributable to new forms of gaming rather than increased consumption of existing forms of gambling. That’s because New York is one of the states that offer the most forms of gaming nationwide—by 2022, New York offered more forms of gaming than Nevada and New Jersey.

Mobile Sports Betting

Mobile sports betting is one of the more recent additions to the state’s gambling offerings—it first went live in January 2022. Revenues hit $727.4 million in collections for the first full year of mobile sports betting, double the projection of $357 million. However, the state notes that the higher collections were primarily attributable to the number of licenses issued to mobile sports wagering providers and the higher tax rate that went into effect after initial projections.

How high is that tax rate? New York imposes a tax rate of 51% on gross gaming revenues, one of the highest in the country.

It’s worth noting that as mobile sports wagering has increased, gross gaming revenue from in-person sports wagering at the state’s commercial casinos has declined—down 45% in the last fiscal year. According to the state, Tioga Downs in the Southern Tier saw the steepest fall off of in-person wagering, tumbling 58.7%.

Highest Sources of Revenue

Although mobile sports betting is growing quickly in New York, it doesn’t represent the largest source of gaming revenues. That honor belongs to lottery receipts, which have increased by $544 million over the past 12 years, a growth of 25.3%. Specifically, mega jackpots—those over $500 million—have boosted increased lottery participation. However, there are only a few of those in a year.

Gambling Problems

A portion of revenues from mobile sports betting are earmarked for problem gambling services in New York. The law required 1% (about $1.6 million) of the tax on mobile sports betting revenues to be set aside for these services in the 2021-22 fiscal year. For each successive state fiscal year, problem gambling services will receive $6 million from those revenues.

Spending on problem gambling services has also increased by two-thirds, from about $5.7 million in 2019-20 to over $9.6 million in 2022-23.

According to DiNapoli, apps that allow for gaming on mobile devices mean an increased need to address the issue of problem gambling. Unfortunately, he notes that the initial Gaming Commission annual report on the impact of mobile sports betting on problem gambling provided little insight.

That said, research indicates higher rates of gambling problems occur among individuals wagering with a mobile device, enabled by the accessibility, privacy, and ease of smartphone use. Overall, the state indicated that more information and better reporting are necessary to understand the effect of mobile sports betting, particularly on young people and the vulnerable.

The state’s report cited work on behalf of the government of New South Wales, Australia, which noted, “Smartphones have facilitated physical, temporal and social accessibility to betting, increased the ease and speed of betting, and extended betting opportunities, access to betting information, and exposure to wagering inducements. While online betting using other devices provides some of these features, the portability of smartphones has significantly enhanced instant accessibility to betting anywhere anytime. This instant accessibility is unique to smartphone betting and allows bettors to immediately act on a gambling urge. While bettors value the convenience of this instant accessibility, the platform characteristics and situational features of smartphone betting interact in ways that can elevate harmful behaviours.”

Dueling Issues

While not all gambling revenue dollars are the result of problematic behavior, there is no doubt that an increase in problem gambling adds to the state’s coffers. A decline in gambling, including problem gambling, would reduce revenues—and thus, dollars for problem gambling services. An overall drop in gambling revenue would also decrease dollars for educational programming.

This is a problem that other tax authorities have grappled with over time—taxes from behaviors that taxpayers might not want to encourage (like drinking, smoking, and gambling) tend be used to support social programs. While some of that revenue might be used to support behavioral programming like cessation programs, not all of it is—as here, where gambling revenues support education. If cessation programs are successful, tax authorities will need to consider alternate sources of revenue in the future to fund education and other social programs.

Across the Country

Not all states allow online sports gambling—that used to be the case in most states. That was thanks to the Professional and Amateur Sports Protection Act of 1992, also called the Bradley Act, which largely made sports betting criminal.

New Jersey was the first to significantly challenge the law, making some sports gambling legal in 2011. Other states, like Kentucky, also began making noise, and the scene was set to duke it out in court. In May 2018, Murphy v. National Collegiate Athletic Association went to the Supreme Court, which found the Bradley Act unconstitutional under the Tenth Amendment. Today, each of the states is allowed to determine its own sports betting laws.

Sports betting is now legal in over 30 states, with some touting in-person only, some allowing online only and many offering in-person and online sports gambling.

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