New York to add 5-cent fee to bets made with out-of-state companies

SARATOGA SPRINGS, N.Y. – A law set to go into effect Jan. 1 in New York will require out-of-state account-wagering operators to pay a 5-cent fee for every dollar wagered through their operations by a New York resident, with the brunt of those fees going to their New York competitors.

The law, which was contained in a bill passed earlier this year dealing with casinos in the state, will explicitly allow out-of-state account-wagering operators to take bets from New York residents for the first time. State law had previously been unclear on whether out-of-state operators could legally take bets from New York customers. Still, most large account-wagering providers began taking bets from New Yorkers within the past five years, if not earlier.

The law calls the 5 percent fee a “market-origin fee,” and it will be applied to any wager made by a New York customer, regardless of whether the customer is betting on a race at a New York track or an out-of-state track.

Account-wagering companies typically retain 10 to 20 cents per dollar wagered.

The most prominent account-wagering operators that will be affected by the fees are twinspires.com, TVG, and XpressBet, the three largest such operations in the United States. The money raised by the fee will be required to be deposited in an account maintained by the state, with distributions determined by a set of statutory formulas.

Courtney Norris, a spokeswoman for Churchill Downs Inc., which owns twinspires.com, said the company would not comment on the legislation or the fees. Officials for TVG and XpressBet did not return phone calls Friday.

Lee Park, a spokesman for the New York State Gaming Commission, which regulates racing in the state, said that the commission provided “technical assistance” on the bill because of a report it prepared in 2012 analyzing account wagering in New York. Park said the language in the bill was agreed to “by all OTBs, harness tracks, and Thoroughbred tracks.”

Under the law, 40 percent of the money provided by the fee will be distributed to the state’s five offtrack betting companies. Another 50 percent will go to the state’s racetracks, including the New York Racing Association, Finger Lakes, and the seven harness tracks operating in New York. The state will retain the remainder.

NYRA and Finger Lakes will receive 60 percent of the share that goes to racetracks, with the state’s harness tracks receiving 40 percent. It is unclear how that ratio was determined. According to the New York gaming commission report, account-wagering handle in 2011 on New York Thoroughbred races was $193 million, compared to $18 million on harness races, a more than 10-to-1 difference.

NYRA will retain “5/6ths” of the amount going to NYRA and Finger Lakes, according to the law. Forty percent of NYRA’s share will go toward purses, 20 percent will go toward breeders’ awards, and the remainder will be retained by NYRA.

All told then, NYRA – which operates the three largest Thoroughbred tracks in New York – will receive 10 percent of the money distributed from the fund.

NYRA officials declined to comment on the legislation this week.

NYRA and the state’s five offtrack betting companies all operate their own account-wagering operations. The levy of the 5 percent fee will likely put the out-of-state operators at a competitive disadvantage compared to their in-state competitors by squeezing their profit margins on New York bets.