Yet another meeting about GambetDC seemingly left councilmembers unconvinced the DC sports betting market is performing as strongly as possible.
Sports betting in DC operates under a system that gives the DC Lottery the only District-wide sports betting app, which is powered by Intralot after it won a no-bid five-year contract giving it a 42.5% cut of sports betting revenue. But that GambetDC app routinely has missed financial goals since it launched in May 2020, leaving District leaders wondering if it is the right format.
Whether DC will switch to a system that gives private operators District-wide mobile access is still undecided. Wednesday’s meeting, though, did not include much optimism for the current model from councilmembers.
Lottery continuously missed DC sports betting projections
The purposes of the roundtable were to see if changes suggested by the DC Auditor last September were being implemented and to hear what else could be done to better compete with neighboring states like Maryland and Virginia.
Economic and Business Development Chair Kenyan McDuffie led the meeting and outlined those financial disappointments in his opening statement. From fiscal 2019 through fiscal 2022, GambetDC was supposed to generate nearly $92 million in revenue for the District.
Instead, it returned nothing in 2019, made $352,000 in 2020 and cost the District $4 million in 2021.
“From the Council’s perspective, this can’t continue,” McDuffie said. “We cannot continue to scapegoat the pandemic, the federal enclave, and say (that) because we get a greater rate of return on revenue, we should stay the course. Getting the greater share of zero is still zero.”
Is GambetDC righting the ship?
GambetDC finally is performing ahead of expectations, the Office of Lottery and Gaming‘s Executive Director Frank Suarez said. Costs related to starting the sportsbook, marketing, and regulating the private sportsbooks led to last year’s loss, he said.
Suarez said most of the startup costs have now been incurred and marketing expenses have normalized. GambetDC has an estimated year-to-date transfer of approximately $2.2 million to the District’s general fund, which is more than double the amount of tax revenue that has been collected from private sports wagering operators in the District year-to-date.
“Now, this is how the model was intended to work and it is now functioning as designed with the District-operated sportsbook generating a greater share of the profits. The current 38% decline in tax revenue from private operators illustrates how the privately-operated sports wagering model is actually the riskier revenue stream for the District,” Suarez said.
GambetDC will also launch a “significantly enhanced user experience” this fall, Suarez said. The upgrade will bring the experience more in line with what bettors see at private operators.
Suarez claims big hill to climb for private sports betting ops
The other option for DC sports betting is to give private operators District-wide access instead of a two-block radius from partner stadiums while removing GambetDC. Those operators would then be taxed at 20% instead of the current 10%.
Based on the current 7.7% hold from private operators this fiscal year, Suarez said those operators would have to generate 300% of GambetDC’s fiscal 2022 handle to create the same amount of tax revenue as GambetDC has this year.
Suarez went back to that 300% growth point multiple times throughout the hearing as if it was a near-impossibility for the private operators.
The reality of the situation? Operators are already almost there.
Looking at DC sports betting math
Multiplying GambetDC’s $45.6 million in fiscal 2022 handle by 300% gives a total of $136.9 million. If private operators generated that much handle, revenue so far this fiscal year would be $10.5 million based on the 7.7% hold.
That then generates $2.1 million in tax revenue at 20%.
Private operators, though, are already at a combined $128.9 million in handle for fiscal 2022. That means operators would need to grow handle just 6.2%.
Suarez: GambetDC assumed too many casual sports bettors
There were two variables that led to GambetDC getting off to a slow start, Suarez said. Those were the time to build a sportsbook brand and, most importantly, the 80% payout rate.
“My understanding was that there was an assumption that there would be a lot of casual players in the District and that the payouts would be fine at 80%,” Suarez said. “Well we learned that that actually wasn’t true, that we have a lot of competitive players that actually do look for the best odds.
“And so they aren’t going to Gambet – and, keep in mind, the jurisdiction is so unique compared to any other, we’re only 68 square miles. So when you’re shopping around for the best odds, making that drive to Capital One or BetMGM is an easy, short drive.”
In other words, it sounds like the DC Lottery assumed people would choose convenience over value. That obviously proved wrong nearly two years ago, though. Bettors waited in hours-long lines at Capital One Arena despite the COVID pandemic to get the best prices in town.
What DC Councilmembers said
McDuffie was joined by multiple other members of the DC Council. Most of them also had strong words for the GambetDC operations.
Councilmember Vincent Gray used the word “fool” multiple times when discussing the $215 million no-bid contract given to Intralot.
Councilmember Mary Cheh pulled no punches in her opening statement:
“Like many others on the Council and elsewhere, I’ve been very frustrated by the way sports betting has played out here so far. … Now I hate to say I told you so but I’m going to. I told you so. I opposed this contract from the beginning. … We were told we needed a sole-source compact to hurry up and beat the other jurisdictions and all this other stuff; it was all nonsense.”
Silverman presses on Super Bowl betting outage
Councilmember Elissa Silverman brought up the outage that kept iOS users from betting on the Super Bowl. Notably, that was only because Intralot allowed the Apple iOS app’s certification to expire.
Suarez attempted to tell Silverman that others have this problem around the Super Bowl. He mentioned how other sportsbooks had outages due to demand in 2021. That did not sit well with Silverman, who pushed back on the Intralot contract in 2019.
“Let me pause you there, Mr. Suarez,” Silverman said with a grin on her face. “So there are some outages is what I’m hearing from you because there’s demand, incredible demand. But that wasn’t our issue, is what you’re saying. … So I’m saying you’re trying to create confusion or say, ‘Oh outages happen.’”