The belief that New York Gov. Andrew Cuomo has reversed a long-held opposition to expansion of gambling in the state has sparked sports gaming stocks higher today, as most stocks that stand to benefit rose at least 2% in Wednesday’s trading.
The New York Daily News reported early Wednesday that Cuomo will present mobile sports betting in his upcoming State of the State address as part of his proposal to raise more revenue to close a pandemic-induced multibillion-dollar budget gap.
“New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis,” Cuomo said in a statement provided to the New York tabloid and later released to the press at large.
The prospect of expanded gambling heartened Wall Street, with Rush Street Interactive, DraftKings, Penn National Gaming and dMY Technology Group II, a SPAC buying data provider Genius Sports, each gaining more than 6% in better-than-average volume Wednesday morning. Shares surrendered some of those gains as the markets retreated upon violence in the U.S. Capitol, but still tallied strong gains overall. DraftKings led sports gaming stocks in the session, up 6% to $47.58.
“Reports of New York adding legalized online sports betting (not just on-site, which it currently has) have continued to build and this appears to be the most convincing shift in stance from the governor yet. New York is one of the most important markets,” Ryan Sigdahl, senior research analyst at Craig-Hallum Capital, said in an email during trading Wednesday. The state likely would add $1 billion in gross gambling revenue to the industry annually, Sigdahl added.
Neighboring New Jersey has legalized sports gambling, which is estimated to garner some 20% of its volume from New Yorkers. The Garden State has fewer than half the residents New York has and generates nearly $1 billion in sports betting revenue annually.
New York will look to grant mobile gaming licenses to companies that have partnerships with existing New York casinos, Cuomo said in his press statement. Credit Suisse equity analyst Benjamin Chaiken wrote in a note to clients today prior to Cuomo’s remarks that legislation would probably involve four upstate and three tribal casinos. DraftKings, Bet365, Fanduel, BetRiver and Caesar’s Entertainment already have existing partnerships with casinos in the state. MGM has a deal with what is termed a video lottery terminal licensee, different from a casino in New York’s eyes, though in practice similar. That leaves casinos run by the Seneca and Saint Regis Mohawk tribes as potential partners for another player, such as Penn National, which has a minority stake in Barstool Sports.
“This is incrementally positive, as there was… a significant question whether or not sports betting would even be included in the New York budget, which is expected in the next 2-3 weeks,” Chaiken wrote.
(This story has been updated throughout to reflect end-of-day stock prices and Gov. Cuomo’s midday press release.)