Few New York politicians have been as instrumental in shaping the state’s approach to legalized gambling as J. Gary Pretlow, a Democrat who represents District 89 (Yonkers and Mount Vernon) in the State Assembly.
As chairman of the Committee on Racing and Wagering, he has partnered with his Senate counterpart, Joe Addabbo, in introducing two new bills that could fundamentally alter the state’s gambling landscape. One would lower the nation-high 51% tax rate on sportsbook operators by offering more skins and the other would start the process of legalizing online casino games.
We caught up with Assemblyman Pretlow to discuss those two bills and other topics that will impact New York gambling in the coming months and years. (This interview has been slightly edited for length and clarity.)
New York Online Gambling: Let’s start with your bill to add at least five more online sports gambling licenses between now and January and then scaling up the number of operators in the coming years while lowering the tax rate incrementally. Why did you feel this was the right time for this bill, with everything seeming to run well so far?
Pretlow: I think it’s necessary to make an adjustment to the current tax rate. That was the rate the nine operators agreed to, but I think it’s unsustainable. The operators actually have all the risk and, under the current system, it’s almost impossible for all of the skins to make any money.
Caesars spent $300 million trying to put a corner on the market. Guess what? They lost millions. The state made $78 million in the first five weeks, but the entities didn’t, because they spent a lot of their capital in incentives. I don’t see any room for incentives by keeping only 49% of the gaming revenue, so those are going to go away. When those go away, so does a lot of the play. As the play goes down, people become disinterested.
What I’m looking to do is open it up to more than just nine skins in the state. In New Jersey, they can – they don’t, but they can – offer up to 40 skins, and the tax rate is 14%. They’re still offering the incentives and things to their current players.
If you look at the incentives in New York now, it’s just odds adjustments, no cash being offered. It’s ‘We’re going to give you a little bit better odds,’ and they have less of a chance of losing doing that. That’s not as attractive as someone giving you $3,000 if you put $3,000 in your account.
My proposal is twofold. One is to increase the number of operators in the state, and I’ve been saying there are no Native American or African-American or Latino operators in the mix. It’s only the big boys who could afford millions of dollars in costs. Secondly, to lower the tax rate to something where the entities operating in New York can continue to offer cash incentives. What they’re going to find is they aren’t going to use the New York app if they can help it, if someone else is going to give them free money.
NYOG: The bill remains in committee for now, but when it hits the floor, how do you handicap its chances of passing?
Pretlow: I’m speaking with my counterpart in the Senate [about] introducing it. He’s looking at it right now. I think a lot of entities that signed up at 51% are going to be in favor of it, because they can take the competition and it lowers the tax rate. Plus, the state is going to make more because there’s still a $25 million licensing fee somebody’s going to responsible for.
I’d like to grow it from nine to 19. That’s another $250 million, plus it lowers the tax rate down to, like, 15%. (Actually, more like 25%.) I think that’s doable. The state doesn’t lose anything in doing that. In fact, the state gains by doing it, and it makes us a lot more competitive with our neighbors in Connecticut and New Jersey.
NYOG: Where might resistance come from?
Pretlow: I don’t know. Who would resist having their taxes lowered?
NYOG: Let’s talk a little bit about the effort to get online casino gambling in New York. Is that a slower process, because unlike mobile sports wagering, there is not a mechanism in place just yet to launch online blackjack, poker, and other table games?
Pretlow: It has a tougher road to go, because there is a lot of resistance toward casino gaming in the first place and this just makes it, as some people say, easy. But in terms of supporting it, the brick-and-mortars certainly would be the ones who are doing it, so whoever has a brick-and-mortar now and in the future would be the ones who would make whatever profits come from online casino.
NYOG: It sounds as if it could provide even more tax revenue than the hefty chunk mobile sports gambling has provided. Is that what your analysis shows?
Pretlow: Yeah, because there’s less overhead and they would take a bigger cut.
NYOG: Speaking of brick-and-mortar casinos, would you like to get one of the downstate casinos in Yonkers?
Pretlow: I’m not supporting an either-or entity. I’m actually thinking that both entities, Resorts World in Queens and MGM in Yonkers, do have a leg up being as they already have facilities involved in gaming. They both already have the full support of the communities they’re in.
To me, it’d be a no-brainer, but if the governor chooses to go after bids for three licenses, then the chips fall where the chips fall. If she wants to accelerate existing entities, it would be quicker, because both entities can be up and running as full casinos within, I would say, two weeks.
The facilities are already there. All they have to do is move in the tables, take out some of the VLTs and put in slot machines, and they’re good to go. There are some long-term things MGM would have to do, like build a hotel, which they don’t have already. Genting (Resorts World) already built a hotel. Genting is ready to be a casino.
NYOG: Let’s circle back to mobile sports wagering for a moment and your desire to have a more diverse group of operators. How are you certain that will be accomplished simply by adding skins?
Pretlow: I only know of one — that was Fanatics. I know there are other smaller operators or those who want to get into the business with the wherewithal to pay the licensing fee and want to get in. But if we shut them out before they even have the opportunity to get in, we’ll never know. I think if it’s opened up to all, if they do exist, we’ll know who they are.
NYOG: How many operators in total would you like to see in the long run?
Pretlow: I’m looking at an additional 10 to come in. It would lower the tax rate to something manageable for everybody. The big guys are still going to glom up a lot of the major players, but it gives someone else a shot.
NYOG: Is it fair to say that in the short run, the tax haul for the state will come down, but that it’s a risk you have to take to reach a point of equilibrium?
Pretlow: Oh yeah. I certainly do, but a lot of that is going to be based on wooing customers, giving them a little edge or at least the thought that they have a little edge to keep playing. That comes in the form of incentives. It’s been going on forever in New Jersey. Just giving a little bit better odds isn’t a true incentive for most players.
NYOG: Are you satisfied with the problem gambling program, which is funded by 1% of the tax rate, so far?
Pretlow: I had a meeting with the commissioner yesterday, as a matter of fact. It is working as we’d anticipated. They haven’t seen any large increase in usage of the facilities that are available year over year. That does include the sports betting that was going on — basically in the lower part of the state — in New Jersey. So, I think it’s being handled properly now.
NYOG: Are you a sports bettor yourself?
Pretlow: I placed one bet in my life. No, let me rephrase that. I placed the first legal sports bet in New York state, at Rivers Casino. I do have an account with one of the major players.
Photo: Carucha L. Meuse/USA TODAY