DC Lottery Continues To Back Lottery-Operated Mobile Betting

March 9, 2022
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The DC Lottery continues to defend the monopoly of its district-wide mobile betting platform despite massive cuts to the projected profit the GambetDC program is expected to provide to the District of Columbia’s coffers.

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The DC Lottery continues to defend the monopoly of its district-wide mobile betting platform despite massive cuts to the projected profit the GambetDC program is expected to provide to the District of Columbia’s coffers.

After seeing zero profit transfer to the district from the GambetDC program in fiscal year 2021, the lottery last week submitted projections to a D.C. Council oversight committee that show a projected $1.5m transfer in fiscal year 2022, which runs through September, and similar projections for fiscal years 2023 through 2025.

In earlier forecasts issued to the committee last year, the lottery projected more than $20m in transfers to the district for fiscal years 2022 and 2023 and a $22m transfer in 2024.

“I don't know that we can say that it's underperformed,” said Frank Suarez, executive director of the DC Lottery, when asked specifically by councilmember Kenyan McDuffie if the Intralot-operated product had failed to live up to its expectations.

“I think that that it has had challenges, and that it can improve its experience, for sure,” Suarez said.

“When you look at the increase this year that we had in handle and what we've had in wagers, it would tell you that it's doing pretty well, overall,” he continued. “So I would say that it's on an upward trajectory from that perspective.”

Still, when the District of Columbia's sports-betting law was passed in 2018, and a subsequent no-bid contract for Intralot was confirmed in 2019, the district’s then-chief financial officer projected $92m in transfers to the district through fiscal year 2022.

If the lottery’s fiscal year 2022 projection holds, the lottery-operated program will have instead transferred about $1.8m through 2022.

In addition, lottery officials said, the program resulted in a $4m loss to the district in 2021 due to start-up and marketing costs.

“Yes, there's a $4m cost, but one thing we can't measure is without spending that $4m, how that would have impacted the handle and the total amount,” Suarez said.

“Again, it's a startup, you have to build the brand, you have to acquire players, it takes a lot of effort there,” he added.

“And you've seen that from private operators, as a matter of fact, and if you've seen some of the headlines in the media, a lot of the private operators have had losses because of how much it cost for them to do that, and so we were facing a lot of the same.”

Despite the lower projections and early losses, the lottery continued to rebuff questions about a potential pivot to a competitive mobile market that would enable the likes of Caesars and BetMGM to operate throughout the district, rather than within an exclusive two-block radius of major sports arenas that host affiliated retail sportsbooks.

“I don't think that competitive and opening it up is going to make a significant difference,” Suarez said.

“There are other jurisdictions, actually the outliers that you see in the country, that are way over-performing compared to others, that only have one provider,” he said. “So the idea that multiple providers and adding the private operators is the thing that's going to drive up the revenue is not really proven.”

D.C. will face a challenge from private operators on all fronts soon enough, however, as Maryland will soon join Virginia in surrounding the district with multiple mobile operators, a particular challenge for a city where a sizeable portion of the daily workforce resides in one of the two neighboring states.

The lottery has previously cited a lack of those very people traveling into the district due to coronavirus shutdowns as a major reason for the performance of GambetDC to date.

One step the lottery has taken to compete with the neighboring operators is changing its payout model.

Previously the lottery capped its payouts at 80 percent of handle, a model that was touted in the initial stages by officials as part of the reason why the lottery-operated model would be more financially rewarding for the district than a private-operator based model.

The flipside, however, is that the payout cap results in poorer odds for players which stand out when stacked against private operators with retail operations in the district, as well as mobile operators in the neighboring states.

For at least a year, Suarez said, the lottery is moving to a 90 percent payout cap.

“I think it's very difficult to compete with private operators within your district and on your borders at an 80 percent payout,” Suarez said. “So we've changed that, and we're trying that for at least a year, sort of in a pilot to make sure that it is truly profitable, as we hope it will be. So that's one big thing.”

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