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A D.C. lawmaker’s effort to increase tax revenue from the city’s struggling sports betting operation by opening mobile wagering to multiple operators has garnered wide-spread support from professional sports franchises and gaming operators.
Last month, at-large councilmember Kenyan McDuffie introduced the Sports Wagering Amendment Act of 2024, which would increase the number of district-wide mobile sportsbook platforms from one to eight and establish different tax rates on the three permissible categories of operators.
The measure also creates a new Class C license only professional sports teams who play in a facility with an existing Class A retail sportsbook would be eligible to apply for. A Class C license would cost $2m to acquire for five years and a $1m renewal fee after that.
On Monday (May 6), the D.C. Council’s Business and Economic Development Committee heard testimony from industry executives, local business leaders, problem gambling experts and the city's Office of Lottery and Gaming (OLG) during a three-and-a-half hour public hearing on the proposal.
Under the bill to amend the current sports-betting law, the tax rate on retail wagering in the district would rise from 10 percent to 20 percent. McDuffie’s proposal would tax mobile wagering offered by so-called Class C licensees at 30 percent, while kiosks operated at retail locations would be taxed at 10 percent.
Dan Shapiro, senior vice president and chief development officer at Caesars Digital, said the company supported the expansion of mobile sports betting but has concerns about the tax increase on retail wagering, which draws into question the future viability of its sportsbook at Capital One Arena in downtown D.C.
The two other sports facilities that currently operate retail sportsbooks are Nationals Park in partnership with BetMGM, and Audi Field with FanDuel.
Shapiro testified that Caesars invested $10m in its Capital One Arena sportsbook, which was completed in 2021 and has taken more than 4m wagers in that time. Last year, Caesars paid $735,000 in taxes to the district, bringing the total to $5m since the facility opened.
“I’ll put this in context, again $735,000 was paid based on the model last year,” Shapiro said. “Double the tax rate takes another $735,000 off our bottom line and would put this sportsbook in the red. That tax rate should be left at 10 percent so we can continue to invest in the district.”
“This bill should not have the effect of closing down sportsbooks,” he added.
Robert O’Connor, vice president for government and industry affairs with BetMGM, told the committee that the company “supports the bill as written.”
“A mobile offering will bolster our existing operations because it increases our ability to connect with our customers when they aren’t in and around the ballpark,” O’Connor said. “This model has been successful in other markets around the country and I’m confident that D.C. will experience an increase in gross tax revenues.”
According to figures so far for the fiscal year 2024, the district’s sports-betting market has generated $36.7m in wagers with $33.2m won by gamblers. Since October 1, 2023, sports betting has generated more than $3.458m in gross revenue, which is taxed at 10 percent.
The OLG, which operates the D.C. Lottery and regulates private sports-betting operators, announced on April 15 that FanDuel’s mobile app was operational district-wide, replacing the GambetDC app that launched in 2020, and has generated about $4.3m in revenue over the last four years.
Prior to launch, FanDuel paid the district $5m.
The opposition to the proposal was led Wednesday by the former chief executive of the DC Chamber of Commerce, who said she feared wide-spread mobile wagering would negatively impact small businesses and the betting kiosks they operate. Small businesses that host kiosks receive 5 percent of all gaming revenue from the machines they host.
“I encourage the council to rethink pursuit of the legislation, which would deprioritize the interest of small businesses in favor of allowing large sports-betting operators … to profit even more from gaming in D.C.,” said Barbara Lang.
Currently, FanDuel operates in the district under a sub-contracting agreement with the D.C. Lottery's primary technology partner Intralot and provides for a guaranteed minimum annual revenue for the lottery and for Intralot. The D.C. Lottery’s contract with Intralot expires in mid-July but the lottery is requesting a two-year extension of the deal.
During that period, the OLG will issue a request for proposals for a new lottery operator and sports-betting system. In addition, lottery and sports betting are tied together and any changes would take legislation.
OLG executive director Frank Suarez told the committee Wednesday that FanDuel has been extremely successful with D.C. gamblers wagering $14m on the app in its first two weeks.
“It’s worth noting the strong performance by FanDuel but I also think the bar was extraordinarily low,” McDuffie said. “So, it wouldn’t have taken much to say a better performance in the brief period of time that they have been operating under the subcontract.”
McDuffie described FanDuel as a competent operator, but he expressed his disappointment “over what the district has missed out on for nearly five years.” He also shared his disappointment with how FanDuel was chosen as the subcontractor resulting in a decrease in the lottery’s revenue share to 40 percent without council approval.
“I think it is important to remember that we are in a new situation with FanDuel regardless of what has happened in the past,” Suarez said.
“We’ve had many conversations in the past councilmember, where you’ve said we need to make a change and that is what we have done,” Suarez told McDuffie. “In terms of a competitive environment, we are working on an RFP, and everyone will have an opportunity to bid for that.”
