FanDuel would opt for a lower tax rate and walk away from its lottery contract in Washington, DC if the DC Council approves an open marketplace. President Christian Genetski wrote a letter earlier this month to DC Council chairman Phil Mendelson explaining his company's stance.
The DC Office of Lottery and Gaming (OLG) in March revealed that Intralot, the company that ran the GamBetDC platform, planned to take down the platform and subcontract with FanDuel. The news came as a surprise to the DC Council at that time. But bettors welcomed the change.
GamBetDC was fraught with usability errors and other issues from its May 2020 launch. In four years as the only mobile platform available throughout the city, GamBetDC underperformed. In that time, the District netted $4.3m in tax revenue from it.
OLG operators are taxed at 40%. In an open market, under the proposed amended law, operators would be taxed at 20%. FanDuel paid the city $1.9m in tax revenue in its first 30 days of operation.
FanDuel already has market access
The FanDuel letter was dated 5 June, one week before the DC Council took its first vote on the FY 25 budget. The proposed budget includes a provision to open the wagering market. Should the budget pass as is, DC would welcome commercial competition. FanDuel already has market access through a deal with Major League Soccer’s DC United. The company operates a retail sportsbook at Audi Field, United’s stadium.
Under the current law, sports betting operators can partner with professional sports teams to offer in-person betting and geofenced digital betting. BetMGM (Nationals Park) and Caesars Sportsbook (Capital One Arena) have brick-and-mortar locations and offer mobile betting within an exclusion zone. Companies partnered with pro teams/venues, including FanDuel (Audi Field), would be able to expand access to their digital platforms under the proposed law.
Other commercial operators could enter the state through partnerships or a new “Type C” licence at a 20% tax.
Higher tax rate price to be sole operator
FanDuel currently pays the city the higher tax rate for the right to be the sole operator. It has also already paid the District $5m for the first fiscal year of operations and, per its contract, would pay $10m per year going forward. FanDuel pays all “operational, marketing, and advertising” costs under the contract. Intralot previously charged the OLG for those fees.
Intralot was and would remain the lottery’s sports betting operator, although the existing contract expires next month. It could potentially sub-contract digital sports betting to another operator.
FanDuel is in the process of replacing or rebranding GamBetDC kiosks at lottery partner locations. Consumers can place bets on the kiosks as an alternative to betting on their phones.
OLG would “no longer have participation from FanDuel”
“Should Subtitle R be enacted, FanDuel will transition its operations in the District under its Class A licence under the new regime consistent with its pre-existing contractual relationship, and invoke its termination right under the subcontract,” Genetski wrote in the letter, obtained by iGB. “As a result, FanDuel (i) will no longer pay 40% of GGR to OLG, (ii) will instead pay a licence fee and a 20% tax on its sportsbook wagering revenues going forward, and (iii) will no longer support the retail kiosks at DC small businesses.
“Any District-wide sportsbook operations by OLG would no longer have participation from FanDuel.”
Should the DC Council choose to open the market to more competition, FanDuel’s decision to break ties with the OLG appears to make good business sense. But it could leave the lottery without a viable digital betting platform. Known commercial operators would likely shy away from doing business with the lottery due to the high tax rate and fees.
It’s possible, as OLG chief Frank Suarez said in a hearing on this topic, that the lottery would have to re-launch GamBetDC. Another option is that the lottery would no longer have a wagering operator, or there would be a gap until Intralot finds a new partner.
The budget was not on the Tuesday (18 June) DC Council Committee of the Whole agenda. It appears the next opportunity for a vote would be a 25 June legislative meeting. Should the budget pass, it would go into effect on 15 July.
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