DC Council Considering Competitive Sports-Betting Model In Budget Plan

June 11, 2024
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The Washington, D.C. Council could vote later this month on a budget bill that would include an expanded sports wagering market in the United States capital involving multiple private operators.
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The Washington, D.C. Council could vote later this month on a budget bill that would include an expanded sports wagering market in the United States capital involving multiple private operators.

The “Fiscal Year 2025 Budget Support Act of 2024” was given preliminary approval by the DC Council late last month and is expected to receive a final vote at a meeting to be held in either late June or early July.

The comprehensive budget bill absorbs much of a sports wagering proposal introduced by councilmember Kenyan McDuffie earlier this year that was the subject of a hearing last month by a council committee.

The bill would allow existing so-called “Class A” license holders, which include three of the district's professional sports facilities, to begin offering mobile wagering when the bill takes effect while raising the tax rate on those sportsbooks to 20 percent for both retail and mobile wagers.

Caesars Sportsbook, BetMGM and FanDuel currently operate retail sportsbooks at sports facilities.

In addition, the bill would allow new mobile operators to obtain “Class C” licenses, which would require a partnership with a DC-based professional sports team that plays 90 percent of its home games in the district, as well as compliance with the district’s certified business enterprise small business development program.

Those operators would pay a 30 percent tax rate and a $2m license fee every five years.

Under DC's existing model, the DC Lottery has exclusive rights to offer mobile sports betting, except for on federally-owned lands where gambling is prohibited, and within two blocks of the "Class A" facilities, where mobile betting can be offered exclusively by the operator.

Those exclusivity zones would remain in place under the proposed legislation.

The timing of the move is especially notable because it comes just months after the DC Lottery and its vendor Intralot subcontracted the district’s long-struggling mobile sports-betting offering to FanDuel.

The results have been immediate, with FanDuel generating more than $5m in gross gaming revenue in its first month of operation, which began April 15, more than eight times the revenue generated in the same period the year prior by Intralot’s GambetDC offering.

“I think it worth acknowledging the strong performance of mobile sports wagering by FanDuel, but I also think the bar was extraordinarily low,” McDuffie said last month during a hearing on the proposed legislation. “So it wouldn’t have taken much to see a better performance, even in the brief period of time that they’ve been operating under the subcontract.

“I think it’s what you get when you have a competent operator.”

Under the agreement with Intralot and FanDuel, the district retains 40 percent of revenue from sports wagering, according to DC Lottery director Frank Suarez, which is down from the roughly 57 percent share it received from the Gambet offering.

The DC Lottery would still be allowed to offer its own sports wagering product under McDuffie's proposal that is included in the budget bill, but Suarez said the offering would not be competitive.

“If we were to open up, we would no longer be a viable option for [FanDuel] because they’d rather pay 20 or at the most 30 percent and have to pay half as much as you do currently,” Suarez said.

“I think we’re just not going to be a very attractive option for anyone once it opens up, and so I look at it as once the market opens up, [the D.C. Office of Lottery and Gaming] in terms of actual district-operated sports betting, is probably not going to exist.”

Much like in 2018 when the District of Columbia first enacted sports-betting legislation, the issue at least in part centers around Intralot’s renewal of its core lottery services contract with the DC Lottery, which is set to expire next month.

The DC Lottery has asked the council to approve a two-year extension with Intralot while it prepares a request for proposals to bid out the contract competitively afterward.

The existing contract was approved with significant controversy in 2019 as a sole-source agreement, with sports betting being added to the existing lottery services, and McDuffie was critical of the lottery for asking council members to approve an “11th-hour” agreement instead of preparing a request for proposal (RFP) in advance of the current contract ending.

Major U.S. sports-betting operators including DraftKings, BetMGM and Fanatics have spoken out in favor of the new sports-betting legislation, as while the district's population is just under 700,000, it would allow most major operators to offer sports betting in the U.S. capital city in addition to Maryland and Virginia, completing the nation's seventh largest metropolitan area where many commute between jurisdictions every day.

However, existing operator Caesars has been critical of the bill for raising the retail tax rate, arguing that it would not have invested as heavily in its retail sportsbook at the Capital One Arena in DC under the proposed model.

“I can guarantee you we would not have put $10m into Capital One Arena … if there was a higher tax rate,” said Dan Shapiro, chief development officer for Caesars Digital. “It’s all a math equation for us, and you’re changing the dynamic here.”

Despite Caesars’ protest at the May hearing, the language from McDuffie's standalone bill remained unchanged when ported into the budget measure.

To lobby support for the budget plan, DraftKings has looked to mobilize its existing daily fantasy customer base in the District of Columbia. Late last week, the company sent out emails to its registered DC customers with a form for players to send notes to the DC Council calling for “real sports betting in the District.”

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