Telcos support open DC market, but small businesses voice concerns

Councilwoman Kenya McDuffie chaired a three-hour hearing Monday (May 6) for the Business and Economic Development Committee to explore an open D.C. market.

Representatives from BetMGM, Caesars Sportsbook, DraftKings, and Fanatics Betting & Gaming testified in favor.

The committee also heard strong opposing testimony from representatives of the small business community. And McDuffie and Frank Suarez, head of the D.C. Lottery, revisited their earlier heated debate about why change took so long.

Financially, new bill It would raise taxes and restore funding to tackling issues and responsible gaming. It will also allow seven professional sports franchises and teams to partner with sportsbooks and create new “Type C” licenses.

Mr McDuffie suggested that Intralot, which ran the bankrupt Gambet DC, was holding the Lottery and Gaming Authority “hostage”. He also said that the lottery gave the vendor, Intralot, greater leverage.

“Frankly, I’m upset about it,” McDuffie said. “I think the District of Columbia, the nation’s capital, should be in a better place than we were today, May 6th, with a company that has failed miserably in running a sports betting business and an obsession with generating revenue.” We shouldn’t make decisions based on ideas. I think there’s an argument that they shouldn’t participate in it.”

GambetDC’s failure remains controversial

At this time, OLG has a single agreement with Intralot for lottery and sports betting. the origin of the contract That is the core of the issue being discussed.

The DC Council agreed to a no-bid contract with Intralot in 2019. McDuffie opposed the decision at the time. Lottery and Intralot transactions include both wagers and lottery tickets and cannot be split, Suarez said. Legislative action may be required to mandate separate contracts.

Intralot’s sports betting product, GambetDC, failed to generate meaningful revenue, had substandard odds, and offered limited betting markets.

This year’s Intralot and OLG Agreed to subcontract sports betting to FanDuel, which is also in the no-bid process. His $5 million subcontracted by FanDuel to the city is more than GambitDC generated for the city in his four years of operation.

Suarez said FanDuel received $14.7 million in transactions in its first two weeks of operation, with total gaming revenue of $2.8 million.

But McDuffie wants to see more through an open D.C. market. The four major companies that attended made good arguments for market opening.

Brandt Iden of Fanatics Betting & Gaming testified that his company “estimates that the market will penetrate 1-2% of eligible adults due to lack of choice and accessibility.” He also said 65% of Fanatics’ Maryland customer base has attempted to log in while in the District. A customer of Virginia Fanatics, he also tries 10%.

“Consumers are either traveling to surrounding states to place their bets, or worse, placing their bets in illegal offshore markets where there are no responsible gaming protocols in place to protect customers. .”

Small business owners oppose

Other businesses agreed, saying businesses in the district were at a “disadvantage” with only one option.

Operators want an open DC market, but small business owners are also concerned. D.C. has one of the most comprehensive minority business programs in the United States.

Major business owners are required to contract with businesses run by minorities and women. Several witnesses said opening up the market would eliminate the need for these businesses.

said Okela Stewart of Potomac Supply Company, which supplies thermal paper for kiosks and other gambling equipment. the company may lose business If the bill passes.

He said that in a competitive mobile environment, consumers will choose mobile over kiosks. In that scenario, his company would have no room for expansion. But McDuffie noted that more kiosks could offer the service as more operators enter the market.

Representatives for DraftKings and Fanatics both said they intend to explore brick-and-mortar opportunities once they are allowed to enter the market.

Barbara Lang, a consulting firm owner and former CEO of the Washington, D.C., Chamber of Commerce, said small businesses will suffer in a competitive market.

“A mobile-based competitive system would completely crowd out retailers looking to generate revenue from in-person gaming,” she testified.

Retail stores such as convenience stores and bars can partner with lottery kiosks. Despite Lang’s testimony, it doesn’t seem clear whether the new law would prohibit it.

Tax structure changes are a challenge for Caesars

Another important discussion was taxes. The lottery originally gave him a 57% share from Intralot. They currently earn 40% from FanDuel, which also covers their operating costs.in McDuffie’s bill, The tax rate will be 20% or 30% depending on the scenario.

The lottery says this will reduce profits for the city. However, operators claim that competition in the market will bring in more volumes and increase player spending.

For Caesars, a tax increase could significantly change the equation. The company operates a sportsbook at Capital One Arena.

“This puts the future of retail sportsbooks at risk,” says Caesars’ Dan Shapiro testified. “It would be catastrophic, if not fatal.

“The new law should create opportunities for more companies to profitably enter the market. It should not paralyze existing businesses or discourage local investment.”

The jousting continues

Once public testimony was complete, McDuffie and Suarez faced off for the second time this year. McDuffie called the timing of the new deal with FanDuel suspect.

He also pressed Suarez over the lottery’s slow movement regarding requests for proposals (RFPs). The RFP will be a step towards realizing an open DC market.

In that conversation, Suarez and his staff suggested that GambetDC could re-emerge if McDuffie’s bill passes and the digital gaming tax rate drops to 20%.

OLG argued that if the tax rate were lowered, FanDuel could terminate the lottery contract, which would result in OLG losing the vendor. In that scenario, one staffer said, “we would be dealing with Gambet again, and that’s not what we want.”