D.C. Councilmembers Remain Skeptical Of Lottery’s Sports Betting Product

December 16, 2022
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District of Columbia lawmakers continued to express concerns about the city's much-maligned sports betting model at a hearing this week, while stakeholders lined up to defend the existing model against new legislation.

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District of Columbia lawmakers continued to express concerns about the city's much-maligned sports betting model at a hearing this week, while stakeholders lined up to defend the existing model against new legislation.

The D.C. Council’s Committee on Business and Economic Development held a hearing Tuesday (December 13) on Bill 24-1063, a measure that would open the district’s mobile sports betting market to multiple private operators.

Currently, the existing structure gives the DC Lottery a virtual monopoly on mobile wagering with limited exceptions.

“We could have gone in another direction and allowed for competition in the area, and then tax the profits made by the competing app vendors, but the council was taken with the idea that this was a special case warranting a sole source contract, and it's time for us to admit that that was wrong and revisit the whole system,” said councilmember Mary Cheh.

“There are a number of successful betting apps in other jurisdictions; no reason for us to continue pouring money into a failing one.”

In the district, the DC Lottery offers its own mobile and retail products, while stadiums and arenas can offer their own sports betting products through retail offerings as well as limited mobile betting within a two-block radius of the property.

Local bars and restaurants can also obtain their licenses to offer their own retail betting platforms.

The DC Lottery’s GambetDC product has seen its share of issues since legislation was approved in 2019, including a later than initially planned launch, technical problems that included an extended down period during this year’s Super Bowl in February and most notably, revenues that have well underperformed projections.

To date, GambetDC has resulted in about a $1m deficit due to start-up costs and other related expenditures that negated just over $3m in transfers to the district.

Initial projections when the legislation was presented by the district’s chief financial officer estimated $92m in transfers to the district through September 2022.

DC Lottery Director Frank Suarez maintained the lottery's argument that private operators would have to significantly outperform the existing product in order to produce the same level of revenue that the Intralot-powered GambetDC app can provide.

“It’s very difficult to imagine they could actually do that high degree of growth, not to mention that they would be a little bit later in the game,” Suarez said, noting that a new market would have to compete against Maryland’s newly launched mobile sports wagering offerings.

Suarez added that the lottery had yet to see an impact on GambetDC from the few weeks of Maryland’s opening.

“I think it’s a very big challenge for private operators to achieve that, they haven’t been able to grow that fast here in the last year, and so I just don’t see how that would be an easy task for them.”

Suarez touted that in fiscal year 2022, GambetDC’s handle grew 38 percent year-over-year and resulted in a $2.7m transfer to the district, the highest transfer to date.

Still, the bill’s sponsor, Elissa Silverman, remains skeptical of the future success of the GambetDC app, particularly against the increased competition from neighboring Virginia and Maryland.

“I just think that we will be unable to compete with our neighbors and Gambet continues to be a poor performing mobile app,” Silverman told VIXIO GamblingCompliance on Thursday (December 15).

“Certainly, DraftKings and MGM and Caesars, they will all improve their apps, so I think we're going to have poor performing app, which will not bring in revenue, which is the whole point in the sports betting program.”

Washington, D.C. remains the only jurisdiction in the United States that offers both retail and mobile betting where retail betting makes up a higher percentage of market share than mobile.

Nationally, in September 2022, the first month of the National Football League (NFL) season, online wagers represented 91 percent of overall betting handle, according to VIXIO’s U.S. Sports Betting Market Monitor.

However, in D.C, online wagers represented only 30 percent of betting handle.

Retail beneficiaries of the program spoke out in favor of keeping the existing structure in place, including restaurants and bars that are either licensed to offer their own products or serve as vendors for GambetDC’s retail product.

Caesars Entertainment, which operates the district’s largest retail sportsbook inside Capital One Arena, also spoke out against changing the existing model.

“Creating unlimited 'class C' mobile licenses in a relatively small jurisdiction like DC will result in the loss of many jobs at Capital One Arena and other sports betting operations in the district,” said David Grolman, senior vice president of retail operations for Caesars.

“We believe the current framework for sports betting works, creates jobs, grows businesses and encourages investment while still having healthy competition amongst the operators and ample opportunities for sports betting customers.”

When asked what the district’s priorities for sports betting should be, Silverman said she believed that the goal should be to bring in the most total revenue for the district.

“Certainly, to do that, supporting our local and minority-owned businesses is very important, but if we have a poor-performing app that drives business to the other jurisdictions, then I think our brick-and-mortar operators will suffer too,” she told VIXIO.

The existing bill itself will die at the end of the year without a vote as the D.C. Council ends its two-year session.

Silverman, an independent councilmember who was defeated in her re-election bid last month, will not be able to reintroduce the bill next year and says she does not know if the bill will have another champion to bring it forward next term.

“I’ve heard a colleague is interested, I think it probably depends on what the committee structure looks like next council period and how poorly performing Gambet continues to be,” she said.

“I don’t know what I’ll be doing a year from now, but I’ll certainly be interested in how Gambet’s performing, and my prediction is that it remains poor performing.”

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