Gambling in the US, be it in the form of commercial casino gaming, sports wagering, or lotteries, is regulated at a state level. As each state has a unique history and relationship with gambling, it is unsurprising the related statutes are very lenient in some places and extremely stringent in others. New York belongs to the second category, showing little leniency toward gambling operations on its territory.
Various legal forms of gambling are available to the residents of the Empire State, including commercial and tribal casinos, state-sanctioned lotteries, pari-mutuel wagering on horse races, video gaming terminals, and charitable bingo. Commercial and tribal gambling operations collectively fetch over $2 billion in annual tax revenue to the state treasury, with most of the money going toward various education programs and local governments.
The first legal retail sportsbooks arrived in New York in the summer of 2019, shortly after the fall of the statewide ban on sports betting. In-person wagering on the outcomes of sports events is currently possible at a handful of commercial casinos. New York lawmakers recently gave the green light to remote betting and the first mobile sportsbook apps went live in early January 2022.
While the local gambling industry is undoubtedly making headway with the further expansion, New Yorkers are yet to witness the legalization of online casinos. Online chance-based games have not yet gained the approval of local lawmakers but this hardly prevents the population from playing them at offshore casinos licensed in other jurisdictions.
Gambling Laws in New York
As is the case in most states, the legalities surrounding gambling in New York are somewhat intricate. The primary pieces of legislation that govern the sector are the State Constitution and the Penal Law. Several federally recognized tribal nations have compacts with the state government, offering casino games in their reservations under the Indian Gaming Regulatory Act. State-sanctioned lotteries fall under the scope of the New York Tax Law.
New York State Constitution
New York Penal Law
New York Racing, Pari-Mutuel Wagering, and Breeding Law
Tribal Gaming Compacts in New York
New York Lottery Law
New York State Constitution
The New York State Constitution addresses gambling in Article 1, Section 9 (1) where it states gambling activities are generally prohibited with few exceptions. The legislation makes exemptions for state-operated lotteries, pari-mutuel wagering on horse races, and authorized commercial casino gaming at up to seven licensed facilities.
Casinos were illegal in the Empire State until local voters embraced an amendment in November 2013 to decriminalize them. Section 9 (2) states that local villages, towns, and cities can vote to approve the conduct of bingo and similar number games for charitable purposes by non-profit organizations.
The individuals who organize and operate such games are not entitled to any remuneration. Single prizes cannot surpass the amount of $250. Any series of wins scored on one occasion must not exceed $1,000 in value.
New York Penal Law
The New York Penal Law also contains references to gambling, describing it as staking or risking anything of value on outcomes that are based primarily on chance. The person making the stake should receive something of value upon correctly predicting the outcome of the chance-based event. Judging by the wording of the text, the law makes no distinction between brick-and-mortar and remote gambling.
The legislation also provides a definition of gambling devices and describes them as machines or pieces of equipment used to conduct gambling activities between persons or between the player and the machine. Bookmaking is described as illegally accepting wagers from people as a business.
The New York Penal Law disallows the promotion of unauthorized gambling and the possession of gambling records or illicit gaming devices. The manipulation of gambling results, the use of counterfeit gaming instruments, and other gambling-related frauds also constitute criminal offenses.
Players who engage in unauthorized gambling activities are not prosecuted under the New York Penal Law. Depending on their severity, gaming frauds constitute either Class A misdemeanors or Class E felonies.
The possession of unauthorized gambling properties and their use is considered a Class E felony as well. Individuals convicted of Class E felonies face probation sentences of up to four years. Those found guilty of Class A misdemeanors are sentenced to up to three years probation, imprisonment of up to 364 days, and/or maximum fines of $1,000.
New York Racing, Pari-Mutuel Wagering, and Breeding Law
Article 13 of the Racing, Pari-Mutuel Wagering, and Breeding Law contains a provision that authorizes the operation of up to four casino resorts in upstate New York. The tax revenue the state collects from such casinos goes toward funding the public school system and the municipalities that host the commercial gaming venues.
The legislation makes a distinction between two development zones. The first zone comprises New York City, Westchester, Suffolk, Putnam, Rockland, and Nassau. The second zone covers all other counties in New York State. Each zone is further divided into smaller development regions as follows:
Development Regions within Zone One
- Region 1 – the counties of Westchester, Putnam, and Rockland
- Region 2 – the counties of New York, Kings, Queens, Bronx, and Richmond
- Region 3 – the counties of Suffolk and Nassau
Development Regions within Zone Two
- Region 1 – the counties of Dutches, Columbia, Sullivan, Ulster, Greene, Delaware, and Orange
- Region 2 – the counties of Albany, Washington, Fulton, Saratoga, Rensselaer, Schenectady, Montgomery, and Schoharie
- Region 3 – the counties of Warren, Franklin, Essex, Hamilton, St. Lawrence, Jefferson, and Clinton
- Region 4 – the counties of Chenango, Cayuga, Oneida, Madison, Lewis, Onondaga, Otsego, Oswego, and Cortland
- Region 5 – the counties of Seneca, Broome, Schuyler, Chemung, Tompkins, Tioga, and Wayne
- Region 6 – the counties of Wyoming, Yates, Steuben, Chautauqua, Allegany, Erie, Livingston, Cattaraugus, Genesee, Monroe, Ontario, and Niagara
The law authorizes the New York State Gaming Commission (NYSGC) to issue four commercial gambling licenses in the second zone. The regulatory agency has no remit to grant such permits for the first zone, however.
One of the conditions licensees must meet is to start gambling operations within two years of receiving their permits. Gaming facilities cannot receive authorization to operate within the counties of Madison, Cortland, Essex, Jefferson, Saint Lawrence, Hamilton, and Franklin, among others. Article 14 of the same legislation allows for the provision of daily fantasy sports and outlines the criteria DFS operators must meet to gain authorization from the state regulator.
Tribal Gaming Compacts in New York
The Empire State has several Native American casinos that operate in line with the provisions of the Indian Gaming Regulatory Act of 1988. Said law enables native tribes to offer casino gaming on tribal lands provided they have entered into compacts with state governments. Indian casinos are regulated separately by the National Indian Gaming Authority.
At the present moment, the New York Government has established compacts with three sovereign nations – the Oneida Indian Nation, the Seneca Nation of Indians, and the Saint Regis Mohawk Tribe. The NYSGC observes for compliance with the compacts but other than that has limited supervisory powers over tribal gaming businesses.
The Indian Gaming Regulatory Act divides gaming activities on tribal lands into three distinct classes.
The compacts the state government has agreed upon with the Saint Regis Mohawk and the Oneida impose no restrictions on the number of gambling venues the two tribal nations can operate. There is no limit on the maximum number of gaming machines, either. The compact with the Seneca enables the tribe to run up to three gambling venues with no restrictions on the number of gaming machines.
The Oneida and Saint Regis Mohawk compacts have no expiration date but remain effective until the parties involved agree to terminate them in writing. The Seneca initial compact expired in 2016 and was subsequently renewed for seven more years.
New York Lottery Law
State-sanctioned lotteries and video lottery terminals are governed by the provisions outlined in the New York Tax Law, and more specifically, in Article 34. State-operated lotteries are subject to the regulatory oversight of the Division of Lottery, which is part of the New York State Gaming Commission.
The article lists the regulatory powers and duties of the lottery division along with the requirements sales agents must cover to receive authorization. It prohibits the sale of lottery tickets to individuals under the legal age of 18. Employees and board members of the division cannot participate in state lotteries or claim lottery prizes.
Commercial Gambling License Types and Requirements
The Racing, Pari-Mutuel Wagering, and Breeding Law allows for the issuance of three types of licenses for commercial gambling – for landbased gaming facilities, casino vendors, and occupational permits for casino employees.
Gaming Facility Licenses
Casino Vendor Licenses
Occupational Licenses
Gaming Facility Licenses
Candidates for gaming facility permits must prove they have gained enough support from the host communities and have sufficient experience in the gambling industry. They should meet the minimum license thresholds and undergo an extensive investigation to ensure their suitability. Candidates who have been convicted of serious crimes like perjury, fraud, or embezzlement are altogether disqualified from the application process.
Application forms are provided by the New York State Gaming Commission. The candidates must fill in accurate contact information, their principal address, and background information about board members and stockholders.
If approved, applicants must build their proposed commercial gaming venue within two years. Applying for a license itself is expensive as candidates must pay $1 million upfront to cover the costs associated with their background investigation. Each license has an initial duration of ten years.
Casino Vendor Licenses
Vendor licenses are necessary for the distribution, sale, manufacturing, and repair of slot machines and other gambling devices. Third-party testing agencies that perform audits on behalf of locally licensed commercial casinos also require such permits. Gaming vendors must demonstrate their probity and good character to gain the approval of the New York State Gaming Commission. Vendor licenses expire after five years, with the option for renewal after this period.
Occupational Licenses
Occupational licenses are required for all employees with direct involvement in the gaming operations on the casino floor. One of the conditions applicants must fulfill is to be residents of New York State. The local regulatory agency can decide to waive this condition for key employees whose position requires them to work outside the state. The candidates must submit their personal information as they, too, undergo detailed background checks. Occupational licenses have a validity of five years and require renewal afterward.
Sports Betting Law and Regulation in New York
Punters from the Empire State can legally bet on sports events thanks to the passage of the Upstate New York Gaming Economic Development Act of 2013. The legislation authorized in-person sports wagering at four retail locations but it was not until March 2019 that the NYSGC introduced draft regulations for retail sportsbooks. The regulatory framework was finalized shortly after and the first authorized retail sportsbook in the state commenced operation in July 2019.
Requirements and Taxes on Retail Betting
Mobile Sports Betting
Requirements and Taxes on Retail Betting
Upstate commercial gaming operators can offer in-person sports wagering with authorization from the NYSGC. The same goes for tribal casinos that hold Class III gaming licenses. No initial licensing fees are in place for commercial gaming venues allowed to offer in-person betting.
Betting permits have the same validity as gambling facility licenses. Other than that, retail sportsbooks are subject to a 10% tax on their gross revenue. Additionally, a 0.25% excise tax is imposed on each authorized bet under Title 26 of the United States Code. New York sportsbooks are not required to contribute integrity fees to professional sports leagues.
Licensed sportsbooks must clearly display the odds of each available event, be it professional or collegiate. Speaking of which, wagering on the outcomes of games that involve New York college teams or underage players is strictly prohibited.
Mobile Sports Betting
Legal online and mobile sports betting arrived in the Empire State in April 2021 when Governor Andrew Cuomo approved a new budget bill for the 2022 fiscal year. The NYSGC finalized the regulations for remote betting operations toward the end of 2021, paving the way for the launch of the first mobile sportsbooks in early 2022.
Punters from all over the state can join the mobile action as long as they are physically present in New York. Mobile betting providers should have their servers located within one of the upstate commercial casinos. The initial licensing fee they must pay amounts to $25 million.
The landbased casinos receive $5 million annually from each platform provider whose servers they house. Mobile sportsbooks are not required to use official league data or pay integrity fees. They are taxed at 51% of their gross betting revenue from local punters.
Legal Status of Online Casino Gambling
Remote sports betting and daily fantasy sports (DFS) are the only authorized forms of online gambling in the Empire State. Online fantasy sports providers must register with the New York State Gaming Commission under Section 1402 of the Racing, Pari-Mutuel Wagering, and Breeding Law.
The local regulatory body can only grant temporary DFS permits for the time being with a duration of three years and the option for renewal afterward. Fifteen or so operators hold temporary licenses for the provision of such contests, including DraftKings, Boom Entertainment, RealTime Fantasy Sports, Yahoo Sports, and FanDuel.
Conducting interactive fantasy sports without registration violates Section 1412 of the above-mentioned legislation. Licensed DFS providers must restrict underage persons from participating in the contests and allow those of legal age to exclude themselves. DFS advertising materials should not target self-excluded players and minors. The ads should also contain clear-cut information about the average winnings players can generate in the contests.
All registered DFS providers are subject to a 15% tax on the gross revenue they generate in New York State. The authorized businesses should contribute additional annual taxes of 0.5% to the state coffers. However, this additional tax must not exceed $50,000 per year.
All other forms of interactive gambling, including poker, remain illegal for now. No technical measures like IP blocking are in place to safeguard local players from unauthorized remote gambling businesses. With that said, some operators licensed under foreign jurisdictions voluntarily restrict the access of customers with New York-based IPs.
New York Gambling Regulators
The New York State Gaming Commission (NYSGC) is the official agency that governs gambling activities on the territory of the Empire State. The Schenectady-based agency supervises commercial casino operators, video lottery terminals, landbased lotteries, sports betting, daily fantasy sports, and horse racing. Class III gaming conducted on tribal lands also falls under its regulatory oversight.
The NYSGC came to life in early 2013 after the New York Lottery merged with the State Racing and Wagering Board. The agency consists of seven members selected by the governor with the advice and approval of the Senate. Each commissioner must have at least five years of administrative experience along with a permanent residency in New York.
Conclusion
The gaming industry in the Empire State has made considerable strides in recent years but remote gambling remains in its infancy. Sports betting and daily fantasy sports are the only legal forms of online wagering at the moment but the sector is likely to see further expansion in the future.
New York is already witnessing the financial benefits of regulated sports wagering – the state collected over $70 million in tax revenue during its first month of legal betting alone. Given all this, it is safe to assume lawmakers could move to legalize remote casino gaming in the years to follow. A recent bill proposed regulations for online poker but it has not yet passed into law.
