The first round of hearings on DC sports betting has ended. The first-round victory went to a single-operator model, with Intralot, a Greece-based lottery supplier, likely to be the benefactor.
The decision comes days after Legal Sports Report obtained documents showing that Intralot claimed it could produce revenue that would be up to 30 times what a multi-operator system might generate.
The comparison, however, was not apt for the DC analogy; nonetheless, through the first round of hearings, Intralot appears to be the victor.
The District’s sports betting plan raises a number of other potential questions. First, how did an alliance of Major League Baseball, the NBA, the PGA Tour, MGM Resorts, DraftKings (of which MLB continues to own a part), and FanDuel come together?
A federal matter in DC sports betting
The simple answer is that they all saw some value in lobbying together in DC. Strategically, setting up in the nation’s capital might be legally wise.
The District of Columbia, as you are likely aware, is not a state. It is a constitutionally created federal district within Article I, Section 8, Clause 17:
The Congress shall have Power To… exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States…
The passage of a DC sports betting bill would technically be a federal law. Since 1973, DC has largely governed itself with the passage of the Home Rule Act.
Nonetheless, a victory might be a psychological one for groups who have taken losses elsewhere (the first round of hearings were yet another, but expect the strange-bedfellows alliance to try to bounce back).
Why location matters
Another potential benefit from appearing in DC and playing on federal turf is litigation over official data would immediately be appealed to the DC Circuit. It’s a Court of Appeals that has not issued a ruling on the protectability of data in a sporting context.
The passage of a DC sports betting bill is, of course, a long way off. Many moving parts in the DC legislation could potentially derail the bill before parts of it ever end up in court, or Intralot succeeds with a monopoly inside the beltway.
Just how exclusive is exclusive?
Another question that emerged out of the alliance of interests revolves around their desire for exclusivity zones surrounding sports stadiums. The request has two subpoints:
- Benefits for small businesses should be balanced with attracting larger operators who will bring significant investment into DC, including by creating an exceptional sports betting experience, particularly around the District’s state-of-the-art professional sports facilities.
- Create a 5-block zone around each of these sports facilities where no retail establishment, either through the lottery or a private operator, may operate a sports book without the express approval from the owner or lessee of the facility.
The first part is nonsense.
First, Nationals Park is 12 years old, and Capital One Arena opened its doors in 1997. Neither represents the pinnacle of state-of-the-art facilities.
But aside from the thickness with which the odd alliance lays it on in its first point, the second point raises potential problems.
Can they do that?
This is an odd situation, as essentially what you have happening is a government actor saying to a private party that they have authority to restrict others from what they do on their own property.
There are certainly questions about the ability of the DC Council to delegate police powers to private actors (this is similar to issues flagged by Ryan Rodenberg with what PASPA did, in granting enforcement authority to the sports leagues). But another question centers on whether this might be a taking.
What is a taking?
Takings are mentioned in the Constitution’s Fifth Amendment, with the last line stating: “nor shall private property be taken for public use, without just compensation.”
The definition of public use has certainly evolved since ratification in 1789. Generally, just compensation is interpreted to be fair market value.
The Fifth Amendment effectively says that if the government is going to take your property (this term is far broader than physically seizing your house or land through an eminent domain process), they typically must pay you fair value for what they are taking.
Constitutional takings and sport are not uncommon and often accompany stadium-building where land needs to be acquired. Indeed, Nationals Park was constructed with the help of eminent domain. From the original Washington Post story:
To bring the Nationals to town, the District seized property from 16 owners in Southeast DC. After condemnation papers were filed, property owners were given only 90 days to vacate their property. Patricia Ghiglino, who owned an art studio in the area, lamented, “I’ve cried so many days since this first came up [….] It was very, very personal to me. We created the center. I worked 60 to 90 hours a week here, on Saturdays and Sundays. This became not just a business but also my home.”
How do these happen?
Normally takings happen in one of two ways. It can be a physical taking, like when the government shows up at your house (normally represented by a sheriff) and tells you to get out. This is the type of taking that typically makes its way into movies, often with a bulldozer or wrecking ball.
The second type of taking, however, can take place through government regulation and is called a regulatory taking. Regulatory takings arise when government restrictions on your use of your property become so impactful that they effectively limit your economic rights or the value of your property.
The Supreme Court has routinely upheld zoning laws that restrict the owners from conducting certain activities in neighborhoods if the government has an interest in protecting the health and safety of the residents. The question which the court will decide is: does the five-block restriction on wagering without the consent of the stadium owner/lessor advance a legitimate government interest?
This is an intriguing question, as the bill does not ban betting within a five-block radius. It just requires the stadium owner (lessor) to approve the offering, effectively giving the stadium owner’s chosen betting partner a monopoly. Whether this is a legitimate state interest is questionable, but is not a particularly high bar to meet.
What to make of this?
The DC sports betting legislation and surrounding hearings have been in a near-constant state of evolution since they began. The decision to move forward with a single-operator model will certainly dampen the spirits of the Confederates in the alliance seeking five-block sports stadium betting exclusivity.
This proposition appears untenable mainly politically. That legislators would want to take from the potential economic impact generated by businesses in a five-block radius of sport stadiums in an urban setting such as the District of Columbia is almost laughable.
Is the proposal circulated by the alliance constitutional? That’s an open question. There are potential problems with the delegation of power, as well as questions about whether this is advancing a legitimate government interest.
It is important to note that the District would bear the burden of defending that lawsuit, not the sports league/betting operators making the request.
