Corruption Allegations Swirl as D.C. Council Awards ‘No-Bid’ Sports Betting Contract

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On Tuesday, the Council of the District of Columbia voted 7-5 in favor of awarding Intralot (the state’s lottery provider) a “sole-source, no-bid contract (worth $215 million) covering lottery and sports betting operations for the next five years.” Despite concerns about the bill’s sponsor (see: ongoing FBI investigation into council member Jack Evans), his ties to the gaming operator (see: Intralot lobbyist wrapped up in the FBI investigation) and a corporate credit rating that’s been downgraded 3x since September ‘18, the chamber selected the Greek gaming company to be the District’s mobile sports betting technology provider; the alternative was to restart the process and solicit a series of competitive bids. Ultimately, the desire to beat neighboring Virginia and Maryland to market and the misguided belief that Intralot would generate the greatest returns outweighed those hesitations. The contract does not impact legislation authorizing sports betting at (or around) D.C. stadiums and arenas.

Howie Long-Short: Gaming industry experts agree that competition amongst operators drives the best products, competitive pricing and the most revenue, so the council’s decision to limit mobile sports betting to a single operator is a foolish one.

A feeling exists amongst those on the regulatory side of the industry that the District’s non-competitive bid process gives detractors ammunition - a prime example of the ‘race to the bottom’ feared while PASPA reigned - in their pursuit of federal oversight. One well respected insider said that it’s “particularly concerning given that everyone’s trying to avoid federal scrutiny and this is going on in Congress’ backyard.

There was no real urgency for the District to get to market - both VA and MD have already bumped the possibility of passing sports betting legislation into 2020. The decision to fast track a deal, as opposed to holding a more customary procurement process, gives off the impression that something is up even if there’s not. Of course, pending investigations into the state lottery - which was also awarded to Intralot without a bid process - do little to quell doubters’ beliefs.

Council member Elisa Silverman said that “the whole thing stinks” and she’s right. Evans’ bill wouldn’t have passed without the support of council chairman Phil Mendelson. Mendelson reportedly used his authority to bump an amendment authored by council member Vincent Grey (related to how gaming proceeds would be spent) to the top of the ledger in exchange for ‘yes’ vote. While Gray’s bill failed to pass, he still cast the deciding ballot in favor of sports betting monopolization.

Gray’s fellow council members were hesitant to vote against Intralot’s interests because they’ve become convinced that introducing new gaming options would cannibalize the local lottery (thus hurting Intralot’s business). States have gotten so dependent on lottery revenues, they’re now afraid to bite the hand that feeds.

It also appears as if Intralot exaggerated potential revenues to gain the support it needed. Claims that the company would retain as much as $30 of every $100 bet likely helped to convince an uneducated council to vote in its favor. Of course, for Intralot to hold 30% they’ll either need to operate under a parlay model or offer bettors significantly worse odds than they could find off-shore. While a fixed payout sports lottery may help Intralot retain more money per bet, it’s also guaranteed to result in less money wagered overall and less revenue generated. For information purposes, sportsbooks with a traditional standard hold model typically retain $5 of every $100.

Fan Marino: One would presume D.C. would look to have mobile sports betting in place for the start of football season, but that seems highly unlikely. Intralot is a lottery provider, they’re not a brick and mortar casino operator; they don’t have a switch to flip on a sports betting application. There are also unique geo-fencing issues within the District (because you can’t place a wager on Government owned land) that make roll-out more complicated.

Once they do introduce mobile sports gambling to bettors the District, expect to find the parlay model used in Delaware and Oregon. D.C. is a small market and sports betting is a low margin business. Intralot doesn’t have a sports gambling contract in any other states. They’re not going to invest the money it would cost to build a full fledge mobile sportsbook.

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