Most sportsbook operators would welcome a more competitive market for wagering in the nation’s capital — but a few are wary about the price of admission.
Members of the Council of the District of Columbia held a public hearing on Monday for B25-0753, also known as the Sports Wagering Amendment Act of 2024. No vote was taken on the bill, but plenty of testimony was provided to the council members who will help decide its fate.
The legislation, if passed, would amend the current law around sports betting in Washington, D.C., to create a more competitive market for mobile wagering.
Some of the discussion on Monday centered on 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 talking about increasing the license fee and the tax rate, which is [a] double whammy on us,” said Dan Shapiro, senior vice president and chief development officer of Caesars Digital. “It’s all a math equation for us, and you’re changing the dynamic here.”
Classing it up
At the moment, FanDuel is the only online sportsbook operator authorized to take action throughout most 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 professional sports venues such as Capital One Arena and the two blocks around them.
Councilmember Kenyan McDuffie's Sports Wagering Amendment Act would alter the status quo by permitting existing operators to take bets throughout almost the entirety of the district, with exceptions for the two blocks around pro sports venues and federal government property. It would also create a new license class to allow professional sports teams to partner with online sportsbook operators for district-wide wagering.
The increased competition for mobile wagering is something the likes of DraftKings and Fanatics welcome. Caesars does as well, but the legislation’s designs on taxation are giving the operator pause.
McDuffie’s bill proposes that so-called "Class A" operators, such as Caesars, would go from paying 10% of their monthly gross gaming revenue to 20%. Class A operators would also see their licensing fees bumped to $1 million initially and then $500,000 for renewals after five years, double the current cost.
Meanwhile, the new "Class C" operators, partnered with the teams, would be charged 30% of their revenue, in addition to a $2-million application fee and a $1-million renewal fee for the five-year licenses.
It's all relative
The cost could be particularly prohibitive for some operators since D.C. is a smaller market to begin with, boasting fewer than one million residents. 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 suitability investigations.
Caesars is not opposed to the 20% tax rate for mobile sports betting revenue. It’s the prospect of paying the same for retail revenue, especially after sinking $10 million into its physical sportsbook, that the bookmaker doesn’t like. The company said it paid $735,000 in sports betting tax in 2023, and it claims its profit from the venue did not come close to matching that amount.
Meanwhile, Shapiro said the Caesars Sportsbook at Capital One Arena is already losing some business to FanDuel.
“We want our customers to be able to bet with Caesars wherever they are in the district, not just have to go to FanDuel, for example,” Shapiro said. “There is an impact and that’s why we need to mitigate it, both on being able to compete on mobile but 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 most of D.C. The operator, which launched online sports betting in D.C. in mid-April, was brought in to rejuvenate a stagnating mobile sports betting situation, as GambetDC, the lottery's Intralot-backed platform, was a disappointment.
FanDuel already pays a higher price than what McDuffie’s bill proposes. The operator is required to turn over 40% of gross gaming revenue and has guaranteed a payment of at least $5 million in its first full year of operation, followed by $10 million thereafter, according to the D.C. Lottery.
That said, the district’s Office of Lottery and Gaming (OLG) claims the transition to FanDuel for mobile wagering is getting results. That includes more than $5.8 million in handle and almost $1 million in gross revenue generated in FanDuel’s first week of operation, increases of 295% and 256% compared to Gambet a year earlier.
“The FanDuel change has already brought back more than 15,000 active users to the District that were placing their bets in bordering states and has increased the average wager by almost six times the GambetDC average,” said Frank Suarez, executive director of the OLG, in written testimony.
Doing the math
But the lottery office, like Caesars, also has concerns about the proposed tax structure of the new competitive market, especially since FanDuel is locked into a rate 10 to 20 percentage points higher than its potential competitors.
Suarez, citing Office of Revenue Analysis estimates, said FanDuel is projected to generate $42.2 million more in revenue over four years compared to a prior GambetDC-only projection. The competitive market proposed by McDuffie’s bill was estimated to provide the district with $26.88 million over the same four years.
“Although there may be a slight incremental increase in overall mobile and online handle with the addition of Class A and Class C operators, overall sports wagering revenue for the District will decline if the tax rates remain as proposed in the Bill,” Suarez wrote. “The amount of additional handle and increased license fees generated by Class A and Class C operators will not be enough to make up for the reduction from a 40% share of GGR to the lower 20% and 30% tax rates. The cannibalization of the 40% share of GGR will be too significant to make up the difference.”
