ESPN BET Gains Approval To Launch Flagging Sportsbook In New York State

The timing may not be ideal, but PENN Entertainment’s ESPN BET sportsbook on Monday gained unanimous approval from the New York State Gaming Commission to open for business in the state.

ESPN Chief Strategy and Legal Officer at PENN Entertainment Chris Rogers told the board just before the vote that the sportsbook has “a couple of boxes to check” on the technology side, but that the website and app could go live “in a matter of several days, perhaps with a soft launch later this week.”

Sportsbooks tend to experience higher volumes at the start of the college and pro football seasons in early September, so opening for business just ahead of Week 4 in the NFL puts ESPN BET at a disadvantage compared to its established rivals.

New York’s other mobile sportsbook operators are FanDuel, DraftKings, Caesars, BetMGM, Fanatics, BetRivers, BallyBet, and Resorts World Bet.

State of the state

As is the case in virtually every state with a competitive sports betting marketplace, daily fantasy sports companies-turned-sportsbooks DraftKings and FanDuel dominate the market share in New York — with casino industry giants MGM and Caesars establishing a second tier. 

In August, for example, FanDuel reported $2.1 billion in gross gaming revenue in the Empire State, followed by DraftKings at $1.4 billion. Caesars announced $444 million in revenue, with BetMGM next at $231 million. The other sportsbooks combined for just over $200 million in sportsbook revenue.

That sort of advantage by FanDuel and DraftKings began to manifest shortly after a U.S. Supreme Court ruling in 2018 that invalidated the Professional and Amateur Sports Protection Act of 1992. That opened the door for any state to offer sports betting — and 37 states have done just that. New Jersey and Delaware approved the launch of sportsbooks just a month later.

PENN Entertainment first tried its hand in regulated sports betting by acquiring Barstool Sports in 2020, but after a turbulent and unsuccessful three-year marriage in the name of sports betting, PENN sold Barstool back to founder Dave Portnoy for a single symbolic dollar.

PENN then pivoted in August 2023 and agreed to supply ESPN Enterprises $150 million per year for 10 years, or $1.5 billion over the term, to use the brand name in connection with a PENN-powered sportsbook.

The power of ESPN’s brand in terms of awareness by consumers, even during the era of cord-cutting, is undeniable. But whether owing to a product that is not distinguishable in any way, or failed and nonexistent integrations across ESPN media properties, or shortcomings in the risk-management realm, early returns for market share and app downloads have not yet been promising for the sportsbook’s future.

And almost three years after New York first launched online sports betting, will gamblers who already have a loyalty to one or more sportsbooks be willing to add ESPN BET to their long list of smartphone apps? Better yet, keep coming back for longer than an initial trial period?

Rogers said ESPN BET’s launch in other states has shown that “we are attracting new customers to betting,” leading to increased betting handle overall — rather than its arrival simply cannibalizing business from its rivals.

“We think we are growing the market,” Rogers said.

A taxing situation

Still, New York’s daunting 51% tax rate on operator gross revenue — unmatched in any state with more than one operator — makes it financially dicey to offer the sort of appealing new customer signup promotions that are commonplace in states with relatively low tax rates.

PENN Entertainment absorbed WynnBet’s licenses in February, and as recently as last month company CEO Jay Snowden told investors that there still was hope of launching just ahead of the start of the football seasons. But New York’s regulators are not known for being aggressive in terms of taking action, so the approval had to await Monday’s long-ago-scheduled meeting.

WynnBet never gained much of a footing in U.S. sports betting, leading to its exit previously in Arizona, Colorado, Indiana, Louisiana, Massachusetts, New Jersey, Tennessee, Virginia, and West Virginia.

In other business, Commission Chairman Brian O’Dwyer told the board of his concerns about Wynn Resorts’ suitability as a potential partner of a massive $12 billion Hudson Yards West casino project in Manhattan. The plan already has drawn opposition from local elected officials, and state regulators have made community support for any bid a key component for consideration.

O’Dwyer referred to an announcement earlier this month that Wynn had reached a settlement with the U.S. Department of Justice to forfeit $130 million due to its role in a scheme to transfer money from Wynn Las Vegas to residents of China, ultimately allowing for patrons who could not otherwise access cash in the U.S. to gamble at the casino.