Six days ahead of a key sports wagering-related hearing, District of Columbia Mayor Muriel Bowser signed D.C. sports betting legislation into law. With her signature, and because temporary and emergency measures were passed alongside the Sports Wagering Lottery Amendment Act of 2018 in December, Bowser’s signature should be the go-ahead needed for the D.C. Lottery to begin drafting regulations and otherwise developing a structure for how it will oversee and manage sports betting in the nation’s capital.
On Monday Jan. 28, the D.C. Council is scheduled to discuss how it will award its operator contract. After approving a single-app model, under which the D.C. Lottery would have a monopoly on mobile sports betting within the city’s borders, the Council in early January was poised to vote to award the operator contract to current D.C. Lottery vendor, Intralot. But council members were clearly not comfortable with merely assigning the contract to Intralot, and the item was taken off the Council agenda in favor of a hearing about it.
Monday’s hearing in the Finance and Revenue Committee is a public hearing during which committee members will discuss and hear about the benefits of assigning the city’s contract to Intralot with no competition, versus putting out a Request for Proposals and allowing multiple companies to bid for a contract.
The push against an open, competitive market
The new law allows the D.C. Lottery to have the only mobile app available in the city, outside of key sports facilities and their exclusivity zones. It seems logical that opening the RFP process to multiple bidders would yield the city multiple offers from which they could choose the best. But at the recommendation of the city’s Chief Financial Officer, the Council is moving to give the contract to Intralot, the lottery’s current vendor.
Such a move would not be unprecedented — Rhode Island awarded IGT, its lottery operator, its sports betting contract last year. The state did put out an RFP, but IGT was the only bidder.
In asking for the opportunity to bypass an RFP, the CFO’s office pointed to a study done by independent gaming consulting firm Spectrum Gaming Group, in which Spectrum recommends skipping the RFP in an effort for D.C. to keep its advantage as “first mover” in sports betting in its region.
According to the study, it might take up to three years to secure an operator through an RFP and the District would stand to lose $267 million in business revenue, $151 million in new economic activity, and $3.4 million in personal income during the 10-year period beginning in 2019.
The key argument in the study is that D.C. would lose the advantage of capturing commuter traffic from Maryland and Virginia that could be converted into patrons. According to the study, the D.C. market comprises about 1 million adults, 450,000 of whom commute to the District daily. The study posits that before Virginia and Maryland launch sports betting, D.C. could convert them into loyal users.
Maryland, Virginia in no position to legalize soon
Neither Virginia nor Maryland is poised to legalize sports betting in the next year. In Virginia, there are multiple bills in the general assembly, but there is also a movement to table any key gambling decisions in the state in favor of commissioning a study. And in Maryland, it appears that sports betting would have to be decided by the voters, and the next opportunity for that would be in 2020.
As councilmembers decided how to establish sports betting, connected lobbyists swarmed the Wilson Building.https://t.co/TnDOyIBi69
— Washington City Paper (@wcp) January 24, 2019
A comprehensive story in Washington’s City Paper details how Council members have been fending off lobbyists from myriad commercial vendors since Council Chairman Phil Mendelson pulled the emergency legislation that would have allowed the lottery to bypass the bid process. As a whole, it appears the Council buys into the lottery’s idea that going with a single vendor — like they did with the single-app model — will result in the most revenue.
But at least two board members reject the idea of bypassing the RFP, and many of the lobbyists explored in the story have very close ties to council members.
“I think it should be a competitive procurement,” Council member Kenyan McDuffie told the City Paper. “And I’ve listened to and heard from the CFO and others who hold a different view, but I think given the history of the lottery and the controversy surrounding previous procurements, it would be wise for the CFO to bid this out competitively.”
Feeling pressure from lobbyists
Controversy arose in 2008 when the District last sought a lottery vendor. Two council members were accused of contract steering, and while both denied it, the city had to pay $3.5 million to settle a lawsuit about it.
Lobbyists have been working the D.C. Council for months, including several representing Major League Baseball, the NBA and the PGA Tour, all of which were lobbying for the new D.C. law to include a “small fee” off of the total betting handle to benefit to the professional leagues. The Council did not approve a fee, nor has any state that has legalized sports betting. In addition, several lobbyists representing potential mobile sports betting operators DraftKings and FanDuel have been at work.
— Sports Handle (@sports_handle) December 3, 2018
This flier (above) was circulated around the Council offices last fall, when the Council was weighing whether to give the lottery a monopoly. MLB, the NBA, the PGA Tour, Monumental Sports and Entertainment, the Washington Nationals, MGM, DraftKings and FanDuel banded together to encourage the Council not to legalize a “state-run monopoly” and open a competitive market.
Neither DraftKings nor FanDuel plan to testify at Monday’s hearing, and the witness list was not available as of Friday.
Council members believe time is of the essence
Intralot, a Greek-owned company, is currently D.C. Lottery’s vendor. According to the Spectrum Study, there are myriad reasons not to extend Intralot’s contract to include sports betting, including this: “allowing vendors to maintain long-term contracts without rebidding is an ineffective management practice,” with regard to a recommendation Spectrum made to the Ohio Lottery to issue an RFP. But the study places so much weight on D.C. being a “first mover,” that the negatives appear to be, well negated.
Intralot, through the study, suggests that it could have sports betting up and running in D.C. within six months.
There’s no question that D.C. lawmakers feel that time is of the essence. It’s been a theme throughout the legalization process.
“Both Virginia and Maryland have indicated an interest in bringing up this topic when their sessions convene,” Finance and Revenue Committee Chairman Jack Evans told Sports Handle in December. “So it is important for us to get this up and running.”
But the decision to legalize — and how to manage — sports betting in the District will have long-reaching implications. And there seems to be some question as to whether rushing to launch sports betting is really the best way to go.