D.C. Lottery Wants to Extend Monopoly to Intralot
By Jill R. Dorson | Published: January 7, 2019 at 4:32 pmThree weeks to the day after the D.C. Council passed a bill to legalize sports betting, it will take up additional legislation that will allow the D.C. Lottery to partner with an operator without a competitive bidding process, and begin developing sports betting regulations. Though the Council on Dec. 18 legalized sports betting as well as emergency legislation that would make the law effective without waiting for Congressional approval, the bills have not been signed by Mayor Muriel Bowser, so no action has been taken as of yet.
In the interim, D.C. Lottery CFO Jeff DeWitt has asked Council Chairman Phil Mendelson to bring emergency and temporary exemptions before the Council Tuesday that would allow the Lottery to make Intralot its operator without any bidding process. DeWitt and the Lottery pushed hard to get the Council to legalize sports betting in D.C. using a single-app model, meaning that the D.C. Lottery’s sports betting app will be the only one available within the borders of the District of Columbia. In essence, the new law shuts out competition and gives the lottery a monopoly on mobile sports betting in D.C. (with exceptions within certain venues).
A memo dated Jan. 3, from the Office of the Chief Financial Officer for the D.C. Lottery explains that forcing the lottery to go through a Request for Proposals “is estimated to take up to three years” and points to a revenue analysis by the CFO’s office that states it would cost the District $60.9 million in sports wagering revenue between 2019-22.
By bidding for an operator, D.C. would lose ‘first mover’ advantage
In addition, the memo points to a study conducted by independent gaming consulting firm Spectrum Gaming Group, which indicated that the District would give up any advantage it currently has as a “first mover” in sports betting in its region should it participate in a drawn-out bidding process. According to the memo, the lottery already pays Intralot $7 million for its lottery contract, and a sports betting contract would be negotiated based on a percentage of gaming revenue.
The current law, once signed by the mayor and approved by Congress (all D.C. laws require Congressional approval), would allow for the city to “pivot” to a more competitive model, but throughout the legislative process, bill sponsor Jack Evans repeatedly stated that DeWitt believes the single-app model will allow the District to make the most amount of money from sports betting.
That logic has seemed counterintuitive — and anti-capitalisitic — all along. The exemptions that the Council will vote on Tuesday only seem to extend the lottery’s monopoly to Intralot. With no competition and bold revenue promises, what will the actual sportsbook look like for the consumer? With the backing of the pro sports leagues, big guns in the sports betting industry such as DraftKings, FanDuel and MGM, all of which run mobile sports betting in New Jersey and other states, are attempting to avoid getting shut out of the D.C. market. Though the city is ranked No. 22 in terms of population in the U.S., it is certainly among the top two or three in terms of profile and power.
The District of Columbia moved swiftly last fall to legalize sports betting, in a race to beat neighbors Virginia and Maryland to the punch. In Virginia, Representative Mark Sickles (D-District 43) filed a sports betting bill ahead of the session, but it’s the first in a state that has no gaming infrastructure. In Maryland, it appears that legalizing sports betting would require voter approval, which can’t happen until 2020.
Clarification on fees, waivers needed
A second package of emergency and temporary legislation will be offered by Councilmember Kenyan McDuffie in the hopes of amending the Sports Wagering Lottery Amendment of 2018 to clarify fees and the waiver procedure associated with the new law. An amendment offered to the new law when it passed in December increased the application fees for Class A and B applicants, as well as including a discount for applicants that partner with a certified business enterprise (CBE). The language was apparently inadvertently dropped from one section of the new law, and McDuffie is seeking to have that put back in.
If passed, the emergency and temporary legislation would increase the application fee to $500,000 from $250,000 for all applicants and to $100,000 from $50,000 to applicants who have a CBE partner.
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