Job Guarantees, Not Economic Projections, May Be Key To Unlocking iGaming Legalization Stalemate In New York

New York State has been at the forefront of gaming expansion since the turn of the century. Over the last twenty years, New York lawmakers have approved land-based casinos, online sports betting, interactive fantasy sports contests, advanced deposit wagering, internet betting on horse races, and video lottery gaming.

These approved forms of gaming – which are legal in many other states – have pumped billions of dollars into the state treasury to pay for essential services such as the funding of public education. (Over the past 12 years, gaming revenues dedicated to elementary and secondary education have accounted for, on average, just over one out of every eight State dollars spent). In 2023 alone, New York brought in more than $4.7 billion in state gaming revenues, with online sports betting contributing roughly $850 million to that total.

But the most lucrative form of digital gaming remains the proverbial ‘white whale’ for New York lawmakers. I am referring, of course, to online casino gambling (otherwise known as “iGaming”), which if approved in New York, would likely generate annual state tax revenues of somewhere between $1.5 billion and $3 billion – or nearly triple that of online sports betting.

Other states which have legalized iGaming have experienced a similar revenue multiplier. For example, in 2023, Pennsylvania generated over $1.7 billion in iGaming operator revenues, as compared with roughly $459 million in operator revenues from online sports betting – a ratio of more than 3 to 1. The spread in Michigan is even greater – iGaming revenues in 2023 outpaced online sports betting revenues by a ratio of nearly 6 to 1. As explained by former high-ranking state official Howard Glaser (now the Global Head of Government Affairs for gaming behemoth Light & Wonder),“[o]n the whole, online gaming yields about three times more revenue per person than sports betting does.”

Or as New York Senator Joseph Addabbo, Jr. – the influential chair of the Senate Racing, Gaming and Wagering Committee – memorably put it at a conference last year in Saratoga, iGaming has the potential to “blow the numbers from sports betting out of the water.”

Job loss concerns and conflicting economic studies have stalled legislative efforts

Despite these staggering numbers and even with New York now facing a multi-year, multi-billion-dollar budget deficit, efforts to legalize iGaming have stalled in recent years.

The main reason why iGaming legislation has failed to advance in the New York Legislature is due to the vehement opposition of the New York Hotel and Gaming Trades Council, the powerful union which represents more than 5,000 gaming workers in New York and expects to add thousands more by 2026 with the addition of three downstate casinos.

The Hotel and Gaming Trades Council believes that iGaming is a “job-killer” because it will cannibalize brick-and-mortar casinos. They reason that casinos will lose visitation – and, hence, jobs – if New Yorkers are given the option of playing the same casino games online.

However, recent economic studies (see here and here) have suggested that iGaming would actually boost retail casino revenues by 2% or more, pointing to the sustained growth of land-based gaming revenues in New Jersey and Pennsylvania following the introduction of iGaming. These studies highlight several factors as supporting their projected overall revenue boost, including the cross-selling of customers between land-based and digital channels.

But that’s not enough to sway the Hotel and Gaming Trades Council, which refers to a conflicting study from The Innovation Group projecting that the legalization of iGaming in Maryland would lead to a reduction in land-based casino revenues by as much as 10%.

The Innovation Group study also projects that the loss of revenue would cause a 4% to 8% reduction in labor. And that’s the main concern of the HTC, whose political director, Bhav Tibrewal, recently told Matthew Kredell of PlayUSA that the Maryland study is “the main thing . . . that gives us concern.” He added that the HTC’s concerns “were present even before that report, but now it seems very clear there would be a negative impact [on jobs].”

Senator Addabbo and his longtime partner in the state assembly, J. Gary Pretlow, have attempted to assuage the HTC’s job loss concerns by including provisions in their most recent iGaming bills that would have created thousands of new union jobs – primarily iGaming live dealers – and mandating that all live dealer studios be located in New York.

But this too was a nonstarter for the HTC, which remains concerned about iGaming’s potential negative impacts on ‘back-of-the-house’ employees, such as food and beverage employees (i.e., cooks, bartenders, and servers), hotel workers, and maintenance workers.

For every live dealer job that’s added, there may be many more hospitality service jobs that are lost if patron play partially shifts to an online environment – even if overall revenues increase. That’s a fundamental problem that the current debate over iGaming oddly overlooks. How does hiring a live dealer help the bartender or server who may lose his or her job if fewer people visit the casino in person, thereby lessening the need for the same levels of food and beverage department staffing?

To address this particular concern, Senator Addabbo’s most recent bill included a provision – the first of its kind in any iGaming bill – that would have created a $25 million annual fund to help retail casino workers impacted by the legalization of online casinos.

But the HTC’s Tibrewal expressed skepticism over this proposal too, describing the fund as “putting bells and whistles on a job killer. No matter how you cut it, it is not a job creator.”

In the end, the conflicting economic studies and well-intentioned bills provide little assurance to the HTC that online casino expansion would not negatively impact jobs.

As the HTC’s Tibrewal noted, “we’ve yet to be presented with any meaningful evidence this would not have a negative impact on jobs. Until somebody can prove to us that current jobs and the creation of future jobs won’t be impacted, we will be firm in our stance against iGaming.”

The best proof may be an iron-clad guarantee.

Condition iGaming licenses on maintaining (and growing) current job levels

Instead of trying to win the ‘battle of the experts’ or funding more economic studies, the focus should be on crafting a solution that will meaningfully address the concerns of the HTC and its membership.

How do you do that?

Easy. Guarantee the jobs.

In other words, condition the granting of a casino’s iGaming license on its maintaining current employment levels (i.e., at least 100% of full-time equivalent employees as it employed in the year preceding the legalization of iGaming), and then condition future license renewals on the casino licensee’s pledge to increase the number of hospitality service jobs (and the pay associated with such jobs) tied to some performance benchmark (i.e., for every $20 million of annual casino revenue attributable to iGaming, the casino licensee must increase both the number of union jobs and pay by a specified percentage).

After all, if casino operators believe that the introduction of iGaming is going to boost their land-based revenues – as has consistently been the case in New Jersey and Pennsylvania – offering job protection guarantees as a condition of licensure should not be a heavy ask.

And there is even precedent for that in New York.

Take the case of Vernon Downs, the upstate New York harness racetrack that is owned by Jeff Gural. In 2017, the New York Legislature approved legislation that would allow Vernon Downs to keep a larger share of revenues generated by video lottery terminals (VLTs) on the condition that it maintained 90% of full-time equivalent employees as compared to 2016. Vernon Downs forfeited that additional vendor fee – which amounted to roughly $2 million annually – five years later when it was unable to maintain the required staffing levels due to the Covid-19 pandemic. Without this additional revenue stream, Gural said he would be forced to close the track, even issuing a WARN notice to that effect. To protect the track from closing and to save up to 250 jobs, the legislature restored the additional vendor fee last year on the condition that Vernon Downs maintained at least 70% of its 2016 full-time employment levels. Importantly, the union representing most employees at Vernon Downs applauded the move, saying it would allow the racetrack to remain open and save jobs.

By the way, that same bill, which was signed into law by Governor Hochul last October, also contained another casino tax break tied to job guarantees. Senate Bill 4817A (as well as the later enacted Senate Bill 8086) lowered the slot machine tax rate for Tioga Downs Casino from 37% to 30% on the condition that it use the funds resulting from the tax rate adjustment “to rebuild its economic infrastructure, including the rehiring of laid-off employees or the creation of new jobs,” with the goal of “increasing full-time employees.”

Any guess as to who co-sponsored these ‘casino-benefit-for-job-guarantee’ measures?

None other than Senator Addabbo and Assembly Member Pretlow, who are again expected to be the key drivers behind any iGaming bill introduced in next year’s legislative session.

I’m guessing they won’t have to look too far to find a parallel to my proposed solution.

It’s right there. Just use the Vernon Downs job-guarantee language as the template.

If Jeff Gural was willing to guarantee jobs for just a $2 million revenue boost, it stands to reason that other casino operators would be willing to make the same guarantee for a revenue boost of many multiples of that figure. (In Pennsylvania, for example, one casino – Hollywood Casino at Penn National – generated over $700 million in revenue from iGaming in 2023, more than enough to fund the annual payrolls of all the New York casinos combined).

But will job-guarantees be enough to persuade the Hotel and Gaming Trades Council?

If they’re looking for “meaningful evidence” or “proof” that there won’t be job losses due to iGaming, you can’t do much better than job guarantees tied to future license eligibility.

A solution for the downstate casino delay

The HTC also says that it would be “misguided” for New York to move forward on iGaming during the middle of the process for selecting the three downstate casinos. The union is understandably concerned that giving the upstate casinos a head-start on iGaming could have the effect of “altering what the casino market looks like,” potentially leading to the downstate casino limiting the number of union jobs.

If the HTC is concerned about the delay in the siting of the three downstate casinos – since there won’t be any previous employment staffing levels to use as a benchmark – there is a simple solution to that: have the iGaming legislation require, as a condition of licensure, that each as-yet-selected downstate casino must first reach an agreement with the HTC as to the minimum number of full-time jobs and other related considerations. (There is precedent for that in the gaming world as well – in Florida, for example, slot machine license renewals are expressly conditioned on the licensed racino having a binding written agreement with the horsemen’s union regarding minimum purse amounts).

With the stakes so high for the looming downstate casino battle, prospective bidders would be wise to include such guarantees in their forthcoming bids in any event. This is because the “Evaluation and Selection” criteria that will be used by the New York Gaming and Facility Location Board to select the winning bidders include a category called “Workforce Enhancement” (for which a 10% overall weight is assigned). As part of that category, an applicant must demonstrate that it “has an agreement with organized labor, including hospitality services, and has the support of organized labor for its application, which specifies [the] number of employees to be employed, including detailed information on pay rate and benefits for employees and contractors in the gaming facility . . .”

In such a hotly contested battle – there are roughly a dozen or so bidders competing for just three coveted licenses (the last ones available under the state constitution) – it would be gross negligence for a prospective bidder to not have a workforce agreement in place with the HTC prior to the time that the Gaming Facility Location Board makes its final decision.

Could this become a national model for iGaming?

The difficulty in getting an iGaming bill across the finish line is not just a New York problem.

Plenty of other states – including Maryland, Maine, Illinois, Nebraska, and Wyoming – have also tried and failed to pass iGaming legislation in 2024.

The reasons behind each failure may differ from state to state, but in several cases (particularly in Maryland), the lack of union support doomed the bill from the outset.

These collective failures have prompted organizations like the National Council of Legislators From Gaming States – better known by the acronym NCLGS – to propose model iGaming legislation in an effort to assist states that are looking to legalize online casinos.

Senator Addabbo himself is looking to create a national model for iGaming legislation, telling PlayUSA that he “wants to get together with the Hotel Trades Council and figure out a national model for how we can have iGaming and not cannibalize the brick-and-mortar casinos. We just need to have some initiative and get creative with the language.”

In strong union states such as Maryland and New York, any model legislation should be crafted around securing the support of the relevant gaming and hotel workers union.

And that might mean guaranteeing jobs.

With New York’s gaming industry stakeholders converging in Saratoga this week for the annual Racing and Gaming Conference at Saratoga, perhaps this is the perfect setting for kickstarting discussions around a new approach for iGaming legalization in New York.