D.C. sports wagering system goes under committee microscope

D.C. sports wagering system goes under committee microscope

Members of D.C.’s Committee on Business and Economic Development held an oversight roundtable on Wednesday to review issues and changes that may be needed in the District’s Sports Wagering Program.

The roundtable was led by councilmember Kenyan McDuffie, chairman of the Committee on Business and Economic Development, along with key members and public witnesses.

In September 2021, the Office of the District of Columbia Auditor published a report titled, “D.C. Sports Gambling Fails to Meet Expectations”, which suggests several changes to the current sports wagering structure to help the district gain greater revenue from the program.

The goal of the oversight hearing on Wednesday was to determine whether those changes have been implemented and learn what other changes could be made to enhance performance of the sports wagering program. The program has struggled since its beginning in 2019 to grow revenue, and compete with sports wagering programs in neighboring Maryland and Virginia.

While sports betting was largely illegal for the last several decades, now 35 states and the District of Columbia allow regulated sports betting.

In an effort to get sports betting started, the District of Columbia went into a multiyear $215 million contract with Intralot, Inc. in July 2019 to provide sports wagering and related services for the District of Columbia’s Office of Lottery and Gaming (OLG). Intralot developed a sports betting system and phone app called GambetDC.

“In its first year of legal sports wagering, the program generated zero dollars for the district,” said chairman McDuffie. “The second year the district made $352,000 and last year the district lost $4 million.

“On the biggest sports betting day of the year, Super Bowl Sunday, the district’s only districtwide mobile app did not work for anyone who has an iPhone. A day when the district could have generated thousands, potentially hundreds of thousands of bets, when over half the mobile users weren’t able to place a bet on the Rams to beat the Bengals. From a council’s perspective, this can’t continue.”

The District of Columbia’s sports wagering program is comprised of two sports wagering regimes: privately operated sportsbooks, like BetMGM DC, at professional sports stadiums and retail locations and the OLG’s district-operated mobile app and other services pursuant to the multiyear contract with Intralot.

“Now I hate to say I told you so, but I’m going to,” said council member Mary Cheh. “I told you so. I opposed this contract from the beginning. I said back in 2019 that awarding a contract for exclusive control over mobile sports betting was problematic. We were told we needed a sole source contract to hurry up and beat the other jurisdictions and all this other stuff. It was all nonsense. It’s time to admit that that was wrong and to revisit the entire system. There’s no reason for us to continue pouring tax payer dollars into this failing operation.”

Public witnesses Melvin Floreza of Tacoma Station Tavern and Akina Harada of Abunai Poke showed support for the Intralot product on Wednesday as each have GambetDC sports wagering kiosk inside their businesses.

“The installation of GambetDC sports betting kiosk had a tremendous positive effect in increasing our customer traffic, our sales, and more importantly our profit,” said Floreza.

“GambetDC has helped my business significantly by attracting new customers, tourist putting us as a destination rather than just relying on the typical foot traffic and literally putting us on the map for people to come and check us out and check out the sports betting kiosk that we have,” said Harada. “Every person that has played on the kiosk has bought something from my store and always brought their colleagues or friends and so on.”

Initial projections had the city making over $90 million from sports betting by now. Since then, those projections have been lowered.

The district is looking to move forward from their initial issues and compete with neighboring Maryland and Virginia. This called for a rather candid and frank discussion with the city’s OLG during the Wednesday meeting.

“The ship is righting already,” said Frank Suarez, executive director of D.C.’s OLG. “GambetDC handle is up significantly this year. The transfer is up. It’s over double what the private operators are providing in tax revenue. Everything points in the right direction and the model is working as it should now.”

Several members on the committee asked speakers at the roundtable what would make GambetDC’s earnings go up.

“Mobile is overwhelmingly the preferred choice for consumers,” said Jon Mandel, an attorney with Orrick, Herrington & Sutcliffe LLP. “If the district were to explore opportunities for additional participants in the D.C. mobile sports wagering market, I am confident the district will see millions more generated as opposed to the figures we saw that the chair has discussed earlier.”

Suarez repeatedly said adding more operators (FanDuel, DraftKings, WynnBET, etc…) would be the wrong move for the city’s model.

“Not only would changing the model to privately operated mobile and online model be riskier, and provide a lower share of sports wagering profits to the district, but it would also increase regulatory costs,” Suarez said.

GambetDC’s outage in February during Super Bowl Sunday was due to an Intralot fault. Intralot paid $500,000 to the district as a penalty for the failure.

The September 2021 audit report suggested increasing the 10% tax rate on gross gaming revenue to enhance total revenue. Suarez agreed this could be a good move in the future.

“Should we throw it all out?” said Cheh. “Should we terminate our contract with Intralot and go the way of other jurisdictions and have a system that we have examples of that operate very very effectively and very lucratively. I’m just asking for your opinion. What should we do with the mess we’ve created?”

“The district model is built to succeed in the long run and is now illustrating that, with the appropriate time, it will,” Suarez said. “I think everything now points to its working like it should and should continue to grow and provide the bigger share of the profits to the district.”

OLG’s contract with Intralot expires in July 2024.

Political Editor

Keith Stein is a freelance journalist based in Virginia. He has experience in freelance writing, full-time journalism and supporting monthly and weekly news publications. He has also worked as a contributing writer with United Press International.