Members of the District of Columbia’s City Council legalized sports betting in 2018. The move was prompted, in no small part, by the eye-popping $90 million in new tax revenue council members were told sports betting would generate in the first four years. Two years after its launch, however, Washington, D.C., has collected just $4 million in total taxes related to sports gambling, less than what other states collect in sports betting tax revenue in a single month. But D.C.’s fumbled rollout of its sports betting market is not hard to explain.
The problem largely boils down to the fact that D.C.’s sports betting market, particularly for mobile wagers, is fundamentally unattractive to bettors. And the reason for that is so simple it can be summed up in one word: monopoly.
After the U.S. Supreme Court cleared the way for states to legalize, regulate, and tax sports betting in 2018, Washington, D.C., was one of many jurisdictions to jump at the potential revenue windfall. But, while other states authorized a range of in-person and online bookies to compete for customers, D.C. gifted nearly its entire market to one company.
That company, Intralot, was already running the city’s lottery and also happened to have established relationships with some councilmembers, particularly Jack Evans, who resigned over alleged ethics violations in 2019. Yet, amid concerns over potential cronyism and even an FBI probe into the matter, the city council approved a $215 million no-bid contract with Intralot in 2019, guaranteeing the company’s GambetDC app would be the only legal option for mobile sports betting available citywide.
To nobody’s surprise, the utter lack of competitive pressure did not encourage the creation of a competitive product, with features, services, and prices enticing enough to draw bettors away from the casinos of Las Vegas and Atlantic City or the thousands of illegal sports betting websites operating off-shore. Intralot’s GambetDC was a disappointment from the first day of its rocky launch, with users reporting geolocation errors, glitching, and terrible gambling odds compared to others. The app hasn’t improved much since, with the iOS version crashing for the duration of last year’s Super Bowl, the biggest sports betting day of the year.
Bettors’ deep dissatisfaction with GambetDC can be seen clearest by looking at its average “handle,” which is the total amount of money wagered through a bookie during a given period. In the first full year of its operation, between June 2020 and June 2021, GambetDC took in an average handle of just $3 million a month. During that same period, the average handle of West Virginia’s sports betting market was $40 million while the average for FanDuel in Pennsylvania, just one of the state’s fourteen mobile sportsbooks, was $160 million per month.
Councilmembers should have known the Intralot monopoly was a bad bet from the beginning for at least two major reasons. First, the only way Intralot could promise the council such high rates of return was because the company planned to juice its profits by charging bettors more and paying winners less. This is a strategy that could only work if consumers liked the product enough or if it truly was their only option.
Second, all of the predictions about the District’s sports betting market, from both Intralot and city officials, relied on the assumption that D.C. would have a ‘first mover’ advantage, becoming the first jurisdiction in the region with legal sports betting. The city council hoped to secure an advantage by bypassing the normal competitive bidding process. Neither a high rate of return nor a first-mover advantage came to fruition.
In the world of sports betting, sportsbooks calculate the probability of all potential outcomes for any given wager and adjust the odds to encourage balanced betting. Odds basically function like a price tag, with bets on likely winners costing more than bets on likely losers, and by adjusting the odds up or down so that, if done perfectly, the money sportsbooks collect from losing bets is equal to the money they must payout to winners. Because bookies do not want just to break even though, they add a small fee within the odds known as a “vig” or “hold.” Typical sportsbooks set their odds so that this hold rate generally falls between 5 and 10 percent, high enough to generate a slim profit but not so high that their bettors turn to competitors with better pricing. When Intralot presented its initial proposal to the city council, it indicated a planned hold rate of between 20 and 30 percent.
As veteran sports gaming reporter David Purdum put it, placing wagers through the District’s GambetDC app is akin to “paying $2 for a gallon of gas, while other states are only charging $1.” For bettors, this means that placing a bet through D.C.’s mobile sports betting app costs more than placing that same bet at virtually any other sportsbook.
Intralot apparently thought it could get away with charging bettors more money for an inferior product because, as a Lottery spokesperson told reporters in 2020, GambetDC was not designed “to attract high-stakes bettors and odds shoppers,” but rather as a form of “entertainment to casual bettors.”
Presumably, Intralot felt these casual bettors would not know enough to realize GambetDC is overcharging them, and even if they did, Intralot’s government-sanctioned monopoly gave bettors few alternative options. Unfortunately for Intralot, sports bettors in the District of Columbia proved more sophisticated than the company anticipated.
By the time D.C.’s sports betting market actually opened in May 2020, GambetDC was hardly the only game in town. In addition to vibrant in-person sports betting markets, New Jersey, Pennsylvania, and West Virginia had launched their mobile sporting betting markets before D.C., with Virginia months behind and Maryland poised to follow soon after. Bettors in the D.C. region seemed more content to wait in around-the-corner lines to place bets at William Hill’s in-person sports book that opened in July 2020 and quickly outpaced GambetDC’s handle. Others continued the time-honored tradition of border jumping and traveled to states with more competitive gambling markets. By January 2021, this meant little more than driving, riding the metro, or even cycling just over the D.C. line into Virginia.
From the beginning, Virginia’s sports betting market offered more variety than D.C., with four separate mobile sportsbooks. Today, Virginia boasts 14 mobile sportsbooks, including nationally-recognized brands, which, along with in-person sportsbooks, collectively generated nearly $60 million in taxes for the state in less than two years. Some of that revenue, perhaps a significant amount, could have gone to D.C. if the city had not so spectacularly fumbled the ball.
Luckily, if the cause of D.C.’s sports betting woes is simple, the solution is even simpler. Councilwoman Elissa Silverman, one of the few who originally opposed the Intralot deal, introduced legislation in October that would let the city’s five-year contract with Intralot expire, end its monopoly on mobile sports betting, and allow D.C. to issue licenses to other competitors, ideally many.
“Residents deserve an online app that works, taxpayers deserve a program that brings in money for the District, and we all deserve a system where we don’t hand huge contracts to a preferred company and its subcontractors without even looking at the competition,” Silverman said in a press release accompanying the legislation.
Rarely are legislators faced with such an easy decision, but this one is a slam dunk. Moving away from the monopoly deal with one-well connected company and increasing the variety of participants in and competitiveness of D.C.’s mobile sports betting market would produce better products and prices for consumers. As a result, it would also attract more betting and generate more tax revenue for the District of Columbia.