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Poor Casino Revenues Threaten Online Poker in New York

Posted on by John Lathram

New YorkNew York´s brick-and-mortar casinos raked in far less than projected over the first six months of the year, prompting claims of market saturation.

With four months still remaining in 2017, hopes for the regulation of online poker in New York next year have already taken a kick in the cojones. According to data published on the New York Gaming Commission´s website, tax revenues from the state´s three recently opened brick-and-mortar casinos have failed to meet expectations – by huge margins.

Casino owners are blaming “market saturation” for the disappointing revenues, and several politicians – including Governor Andrew Cuomo – have previously expressed fears that regulated online poker would cannibalize the state´s fledgling commercial casino industry. Unless casino revenues improve and meet expectations, it could be a long wait for regulated online poker in New York.

How Bad are Tax Revenues Compared to Projections?

Pretty bad. Prior to New York´s new commercial casinos being granted a license, each had to project how much they would generate for the state in tax revenues. The first casino to open its doors in December – the Tioga Downs Casino near Binghampton – projected first year tax revenues of $40.3 million. After seven months of operations, it has contributed just $15.3 million to the state.

The later-opening casinos haven´t fared any better. Since it opened in January, the del Lago Resort & Casino in Finger Lakes has generated $76.3 million in gaming revenue, of which $22.7 million has been paid in taxes over six months. The del Lago Resort & Casino projected first year tax revenues of between $59 million and $74.6 million, so is on target to miss its worse-case scenario by almost $15 million.

The third of New York´s commercial casinos to open – the Rivers Casino and Resort in Schenectady – projected it would generate between $69 million and 86 million in tax dollars for the state in its first year of operation. Over five months, the casino has paid just $22.4 million in tax, implying its first year´s contribution to the state will be no more than $53.75 million.

Wasn´t Market Saturation Considered Before?

Apparently not. New York legalized commercial casinos following a 2013 referendum showing support for the measure despite there being six tribal casinos and eleven racinos already in operation. The hope was the new venues would attract gamblers crossing state lines to play in casinos located in neighboring New Jersey, Connecticut, Massachusetts and Pennsylvania.

However, hindsight is a wonderful thing, and according to Alan Woinski – president of New Jersey-based consulting firm Gaming USA Corp. – there is not enough business in New York to support the three new casinos plus a fourth one due to open in the Catskills area next March. he told the NY Daily News:

You just can´t have casinos, racetrack casinos and tribal casinos that close to each other.

However, Senator Cuomo – who supported the proposals for the new commercial casinos – put a brave face on the disappointing figures when speaking with reporters. He said

These casinos are just starting.

The variance with the revenue projections doesn´t bother me that much. They have all been widely successful in creating jobs and building beautiful complexes.

Saturation Not the Only Obstacle to Regulated Online Poker in New York

Online poker and live poker may be two different animals attracting different types of players, but concerns about market saturation and cannibalization are sure to be at the forefront of legislators´ minds when Senator John Bonacic and Assemblyman Gary Pretlow inevitably introduce their respective online poker bills next year. However, there are further obstacles to overcome as well.

Doubts already exist about the financial viability of regulated online poker in New York. Under the most recent proposals, PokerStars will be barred from entering the market, suggesting a maximum of three operators will apply for the $10 million licenses. As license fees can be deducted from tax liabilities, the state will be unlikely to collect any further tax revenue over the next three years – all the time paying the costs of regulating the three licensed operators.

There are also objections from anti-gambling groups who claim legislators have no right to reclassify poker as a game of skill to circumnavigate the state´s anti-gambling laws, plus opposition from tribal interests who have been excluded from applying for operating licenses. Unfortunately for proponents of regulated online poker in New York, the longer the state delays in passing laws, the more obstacles seem to appear. Now it already looks likely the state will delay passing legislation until at least 2019.

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