Most sportsbook operators would welcome a more competitive market for betting in the nation's capital - but a couple of are careful about the cost of admission.
Members of the Council of the District of Columbia held a public hearing on Monday for B25-0753, likewise referred to as the Sports Wagering Amendment Act of 2024. No vote was taken on the costs, however plenty of testimony was provided to the council members who will assist decide its fate.
The legislation, if passed, would amend the present law around sports wagering in Washington, D.C., to produce a more competitive market for mobile wagering.
Some of the conversation on Monday fixated the proposed cost of the new market, which would essentially double, even for already-opened brick-and-mortar facilities such as the Caesars Sportsbook at Capital One Arena.
"In this case, we're discussing increasing the license cost and the tax rate, which is [a] double whammy on us," said Dan Shapiro, senior vice president and chief advancement officer of Caesars Digital. "It's all a math equation for us, and you're changing the vibrant here."
Classing it up
At the minute, FanDuel is the only online sportsbook operator licensed to act throughout the majority of the district, acting as a subcontractor to Intralot, which contracted with the D.C. Lottery. Other operators, such as BetMGM and Caesars Sportsbook, are confined to expert sports venues such as Capital One Arena and the two blocks around them.
Councilmember Kenyan McDuffie's Sports Wagering Amendment Act would modify the status quo by allowing existing operators to take bets throughout nearly the entirety of the district, with exceptions for the 2 blocks around pro sports venues and federal government residential or commercial property. It would also create a new license class to permit professional sports groups to partner with online sportsbook operators for district-wide wagering.
The increased competition for mobile betting is something the likes of DraftKings and Fanatics welcome. Caesars does too, however the legislation's styles on tax are giving the operator pause.
McDuffie's expense proposes that so-called "Class A" operators, such as Caesars, would go from paying 10% of their regular monthly gross gaming income to 20%. Class A operators would likewise see their licensing charges bumped to $1 million initially and then $500,000 for renewals after 5 years, double the present cost.
Meanwhile, the brand-new "Class C" operators, partnered with the teams, would be charged 30% of their revenue, in addition to a $2-million application cost and a $1-million renewal charge for the five-year licenses.
It's all relative
The cost could be particularly prohibitive for some operators given that D.C. is a smaller market to begin with, boasting fewer than one million homeowners. In Kansas, a much larger jurisdiction, the tax rate for sportsbook operators is 10%, and there are no licensing fees beyond the cost of background and viability examinations.
Caesars is not opposed to the 20% tax rate for mobile sports wagering profits. It's the prospect of paying the same for retail income, especially after sinking $10 million into its physical sportsbook, that the bookmaker does not like. The company said it paid $735,000 in sports betting tax in 2023, and it claims its revenue from the venue did not come close to matching that amount.
Meanwhile, Shapiro stated the Caesars Sportsbook at Capital One Arena is already losing some business to FanDuel.
"We desire our clients to be able to bet with Caesars wherever they are in the district, not simply have to go to FanDuel, for instance," Shapiro said. "There is an effect and that's why we require to alleviate it, both on being able to compete on mobile however also keeping our tax rate where it is."
For the time being, FanDuel, the leader in online sports betting in the U.S., has the run of the majority of D.C. The operator, which launched online sports wagering in D.C. in mid-April, was generated to rejuvenate a stagnating mobile sports wagering scenario, as GambetDC, the lotto's Intralot-backed platform, was a frustration.
currently pays a greater cost than what McDuffie's bill proposes. The operator is required to turn over 40% of gross gaming revenue and has actually guaranteed a payment of at least $5 million in its first complete year of operation, followed by $10 million afterwards, according to the D.C. Lottery.
That said, the district's Office of Lottery and Gaming (OLG) declares the shift to FanDuel for mobile betting is getting outcomes. That includes more than $5.8 million in manage and nearly $1 million in gross revenue created in FanDuel's first week of operation, increases of 295% and 256% compared to Gambet a year previously.
"The FanDuel modification has actually currently restored more than 15,000 active users to the District that were positioning their bets in surrounding states and has increased the average wager by almost six times the GambetDC average," said Frank Suarez, executive director of the OLG, in written testament.
Doing the math
But the lotto office, like Caesars, also has concerns about the proposed tax structure of the brand-new competitive market, especially considering that FanDuel is locked into a rate 10 to 20 percentage points greater than its possible competitors.
Suarez, citing Office of Revenue Analysis price quotes, stated FanDuel is projected to produce $42.2 million more in earnings over four years compared to a previous GambetDC-only projection. The competitive market proposed by McDuffie's costs was estimated to supply the district with $26.88 million over the exact same 4 years.
"Although there may be a slight incremental boost in overall mobile and online handle with the addition of Class A and Class C operators, overall sports wagering earnings for the District will decline if the tax rates stay as proposed in the Bill," Suarez wrote. "The quantity of additional manage and increased license charges generated by Class A and Class C operators will not be adequate to make up for the decrease from a 40% share of GGR to the lower 20% and 30% tax rates.
