Legal

Washington D.C. Still Has Concerns

A bill that would essentially hand Washington D.C.’s legal sports betting contract to its current lottery provider, Intralot, came before the district council last Tuesday morning.

The whole idea behind bypassing the competitive bidding process in the name of a quicker turnaround has raised concerns throughout the nation’s capitol. A Washington Post editorial last Monday even lambasted the council for its handling of the entire situation, calling it a “sickening spectacle”:

“Horses, whether on racetracks or in stalls, can stir up quite a smell. The push to evade the procurement process carries a whiff of something similar. Proponents of sole-source contracting are trying to steamroll the bill through the council using the argument that time is of the essence …”

The district recently offered a very lucrative procurement contract for sports betting to provide advisory services for the new legislation. Written as a one-year contract with four optional extension years, the deal could provide up to 10,000 hours of advisory work. What makes the deal so desirable is that it would cover not just sports betting, but also the district’s lottery for the next three years. The council decided in December to limit the D.C. sports betting contract to a single provider.  That issue is settled for the time being. However, D.C.’s CFO, Jeff DeWitt, wants to skip competitive bidding entirely in order to begin legal sports betting by fall 2019.

DeWitt’s position suggests that using a normal bidding process would delay the launch of sports wagering for more than two years. He has asked council chair Phil Mendelson to introduce a bill that gives the contract to Intralot last month. That bill passed their committee this past month by a 3-2 vote which included Mendelson. While he does not sit on the committee regularly, he can participate on any vote he chooses.

During the committee hearing, another Councilmember, Elissa Silverman, raised concerns about bypassing competitive bidding and voted against its passage. Silverman was quoted as saying:

“We want to capture the revenue from sports betting, but we also need to modernize our lottery and I can see where a competitive bidding process might bring additional value in terms of that,” Silverman said.

There are only three companies—Intralot, IGT, and Scientific Games—that could receive consideration for the district’s contrac,t and all three operate sports betting verticals in addition to their lottery arms. Intralot promises to hold up to 20 to 30 percent of sports bets in a study provided to the council. In any traditional sports betting model, such a hold borders on impossible. By contrast, Nevada‘s historical hold over decades is 5.55 percent, but things are much different in Washington D.C.

The D.C. Lottery has had a rocky past, and the bidding factors into Silverman’s reservations as well. Questions about the last lottery contract dragged on for years and would even become the subject of a federal investigation. “What is special about the lottery is it was embroiled in a lot of controversy the last time it was competitively bid,” Silverman stated. “Especially given that history, it would be good to competitively bid the contract.”
Silverman continued:

“We do know, and let’s be real, that people bet on sports. We know that there is money to be made by sports owners, by companies that provide infrastructure for gaming — Intralot, IGT, DraftKings. What we want to do as a city is to be able to capture that money. What makes this a unicorn is that the most well-connected business people with ties to City Hall are all involved in this contract.”

Despite Silverman’s concerns, she remains “sympathetic” to lottery concerns. DeWitt and Councilmember Jack Evans believe a first-mover advantage would be critical to the success of D.C. sports betting, especially in speeding up the entire process. Getting to the finish line as soon as possible is important as two neighboring markets, Virginia and Maryland, will consider sports betting bills in their legislatures this year. “Sports betting makes this a bit of an anomaly,” Silverman said. “There is an argument to being a first mover, especially in our jurisdiction.”

Silverman also added that the process is juiced for Intralot comes from those with financial motivations. “Some people have promoted an idea that sole sourcing has been promoted by Intralot and the CFO because the process has been rigged toward Intralot,” she stated. “The voices who say that the loudest are politically connected insiders who would be tied to a competing bidder.”

“I have not gotten hundreds of emails on the lottery contract. I don’t go food shopping on the weekend and have people asking me, is the lottery contract rigged? The very nature of the lottery contract makes it a very high-profile sole-source contract.”

Silverman, as of last Monday, remains undecided on how she will vote on the next measure.

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