NY heads to bidding process after landmark sports betting deal

Forgive New York State Senator Joseph Addabbo Jr. if he’s feeling a little sleep deprived.

On Monday night, Addabbo drove hours from his hometown of Queens to the state capitol in Albany, where he participated in marathon sports betting negotiations. The talks lasted until the early hours of Tuesday morning, several hours before the state reached a landmark agreement that would legalize mobile sports betting in New York. The high-stakes talks in the Empire State have been closely watched by analysts nationwide, given the breadth of the market.

Hours after the Senate on Wednesday morning approved the $211 billion budget for the fiscal year, which includes a framework for a state-run mobile sports betting program, Addabbo had little time to to rest. After all, inquisitive minds in the gambling industry needed clarification on a complex bidding process that could determine the direction of sports betting in New York over the next decade.

Addabbo, chairman of the Senate Racing, Gaming and Betting Committee, participated in a call with investors Wednesday morning, held in conjunction with Governor Andrew Cuomo’s press conference on the budget deal. Cuomo, a three-term governor, sees mobile sports betting as a revenue generator for a state he says can eventually become the nation’s most robust market.

With mobile sports betting possibly set to debut ahead of next year’s Super Bowl, Wednesday’s hottest questions centered on which operators will gain access to the New York market.

Clarification on “platform providers”

Rather than opting for an open market, Cuomo favors a more restricted one where the state will contract with two commercial partners. Under the bill, the New York State Gaming Commission will issue a Request for Applications (RFA) for a sports betting platform provider no later than July 1. From this date, service providers are required to submit their application within a period of 30 days. From there, the commission will select a minimum of two platform providers not later than 150 days after the filing of the final application. The schedule sets the stage for the commission to name vendors in early January.

When the New York legislature issued a Article VII Revenue account Tuesday night, which detailed the plan, sports betting companies, financial analysts, gaming lawyers and industry consultants combed through the fine print. The term “sports betting platform” entered the lexicon of many stakeholders on Tuesday night, leaving the industry scrambling for clarification.

(k)”Mobile sports betting platform” or ” platform ” means the combination of hardware, software and data networks used to manage, administer or control sports betting and all associated betting accessible by any electronic means, including mobile applications and websites accessible via mobile device or computer;

Among the criteria the commission will use to select platform providers are their experience in other states; the advertising mechanisms they bring to the table; their speed to market; and the ability to handle a high volume of bets. Addabbo stressed that the objective of the bidding process is to determine the “best suppliers who have the ability to do business in New York.”

The two selected platform providers will pay the state a one-time fee of $25 million for a 10-year license. The renewal process will be determined by the commission. The state is also seeking revenue-sharing payments of between 50 and 55 percent of the provider’s gross gaming revenue (GGR) each year. Additionally, the provider will make a payment of $5 million to the commercial casino that will host its server used for mobile sports betting.

Strict qualifications, as well as high taxes and fees, seem to favor “well capitalized” companies with “large customer databases” and a strong presence in New Jersey, Oppenheimer analyst Jed Kelly wrote in a research note.

At a Monday press conference, Cuomo mentioned DraftKings and FanDuel by name as the type of companies that could contract directly with the state. Kelly thinks the sports betting companies that have become DFS are “well positioned to be key operators” when the state is commissioned.

Platform providers must also combine to offer “no less than four” mobile sports betting operators, or statewide licenses, depending on the bill.

Clubhouse leaders

According to consultant Brendan Bussmann, a partner at Global Market Advisors (GMA), a leading gaming industry advisory firm, there’s a good chance the platform model will lead to the formation of consortia that already have several brands under one umbrella to use as skins. solidify. As a result, companies such as Flutter (FanDuel and FOX Bet) and Caesars-William Hill may have an advantage in the bidding process, Bussmann notes.

Flutter may also have a leg up on the competition, according to Jared Smith, a prominent sports investment analyst. (Disclosure: Smith is the host of “The Morning After,” a FanDuel-sponsored sports betting program that airs on MSG Networks.) In July 2019, FanDuel debuted in New York with the opening of a Retail sports betting store inside Tioga Downs Casino Resort. in Tioga County. If Flutter is selected as the platform provider, Tioga Downs seems like a natural choice to host a server.

“We are thrilled to see this important step toward establishing legal and regulated mobile sports betting in New York City and are grateful for the leadership of the Governor and Legislature,” said FanDuel Vice President Chris Jones, in a press release. “We look forward to the next steps in the process and hope that we can finally bring our FanDuel Sportsbook product to customers in our home country.”

There is still some ambiguity as to whether a B2B sports betting technology provider such as Kambi, Scientific Games or IGT could qualify as a platform provider under the language. The meaning of a platform is “somewhat open” and could include a vertically integrated sports betting company like DraftKings or a technology provider like Kambi, Credit Suisse analyst Benjamin Chaiken wrote in a note. DraftKings is preparing to migrate an internal technology platform built by SBTech by the end of the third quarter.

“We would like to thank the Legislature and Governor Cuomo for the progress made in bringing legal, regulated and mobile sports betting to New York,” DraftKings Vice President of Government Affairs Griffin Finan said in a statement. . “We look forward to learning more as the process unfolds.”

Addabbo said on Wednesday that vertically integrated sportsbooks could be well positioned during the bidding process. Although BetMGM has not partnered with a retail casino in New York, the bookmaker is eligible to bid for the platform provider deal, he added.

The tight timelines in the RFA process have placed tremendous “pressure and power” in the hands of the state gaming commission, Bussmann said in an analyst note from Truist Securities.

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