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We are at ground zero of a battle over how sports betting may go down in the future in Washington, DC, and perhaps the rest of the country.
On one side: an alliance of sports leagues, teams and gaming interests that just came to light in recent days as legislation moves through the DC Council.
On the other: Intralot, a Greek gaming company that serves as a lottery supplier for a dozen US jurisdictions, DC included.
The latter is telling stakeholders that if it is the single sports betting vendor in DC, it can produce DC revenue that is up to 30 times what a more open model might generate, according to a document obtained by Legal Sports Report.
That would appear to be a vast exaggeration of Intralot’s — or indeed any lottery operator’s — ability to deliver revenue to the state in real dollar terms and skips over some extremely crucial details.
That bill has allowed for two different paths for sports betting:
That dichotomy is what has led to a battle that has played out mostly behind the scenes in lobbying the DC Council. Operators are trying to keep potential access to the DC market open, and trying to push back on the narrative that lotteries are best suited to handle legal sports gambling.
Intralot is selling that it can make A LOT of money for the DC Lottery.
Here is a graphic from a document being circulated by the company that attempts to compare $100 wagered via a lottery-based system and an “independent operator” system where DC can license different sportsbooks:
Obviously, Intralot is promising a lot of money going back to DC if it gets its way — up to $17.50 per every $100 wagered would go to DC in the example on the left. By contrast, Intralot says only about 60 cents to a dollar would be realized by DC government via taxed revenue in the open market model.
But the devil is in the details.
Let’s start here: Intralot is comparing apples to oranges. Its model appears to be using a high-hold sports betting model versus a traditional standard-hold model. Intralot’s model says it would pay out only 70 to 80 percent of all wagers, meaning it would hold 20 to 30 percent.
These are impossible figures to hit under a traditional sports betting model with reasonable odds. Intralot would have to:
In any event, that product, Intralot says, would provide net revenue of up to $24 per $100 wagered, is a disingenuous comparison point for an actual single-game wagering product like we see throughout Nevada and New Jersey.
It’s clear that the total amount of revenue provided in the independent operator model would far outstrip the Intralot model. And while DC might keep more of each dollar wagered with Intralot, there would be fewer dollars flowing in.
A more familiar and standard single-game wagering product would be more successful in trying to capture the illegal market and merely create and retain more customers, resulting in more revenue.
In both examples, marketing dollars are not included; marketing is pretty much a necessity if you want a legal sports betting operation to succeed.
In Intralot’s example, it doesn’t even factor in the cost the DC Lottery/Intralot would have to pick up, rather than it being passed onto operators in the “independent operator” mode.
We know from the European sports betting industry and the New Jersey online casino industry that marketing costs are one of the most significant expenses in sports gambling. Glossing over that fact is also pretty disingenuous.
Lotteries versus gaming operators are shaping up to be one of the major themes for legislative efforts surrounding sports betting in 2019. And DC is serving as the primary battleground.
If Intralot succeeds with getting its model implemented, lotteries in other states might want to follow its lead. The NBA, MLB and the PGA Tour, along with MGM Resorts, DraftKings and FanDuel are trying to push back against the idea in that recently formed “alliance,” as lottery-run sports betting isn’t in any of their interests.
Whatever states and lotteries do around the country, however, they should be comparing apples to apples and realizing what kind of money they might receive, depending on how sports betting happens in their jurisdictions.