With the city’s auditor expected to publish a review soon of the GambetDC site’s revenue performance, D.C. leaders and gambling professionals are pointing fingers, trying to explain why the promise of legal sports betting in D.C. — which officials once predicted would bring in tens of millions of dollars to the city’s coffers — fizzled as soon as it began.
When D.C.'s chief financial officer asked the D.C. Council to approve a no-bid contract to start city-operated sports betting in 2019, he forecast that the app would net more than $22 million in revenue for the District in fiscal year 2021. But in March, the Office of Lottery and Gaming decreased that estimate to $6 million. Two months later, lottery official Craig Lindsey testified at a council hearing that revenue up to that point in the year was just $230,000.
July was the worst month: The app processed fewer than 61,000 wagers totaling just over $2 million gambled, continuing a downward trajectory that saw more than 100,000 bets every month from October to March and then declines throughout the spring and summer.
Everyone involved blames the pandemic: When GambetDC launched in May 2020, the coronavirus had so totally shuttered professional sports that nearly the only options on the site for gamblers to bet on were German soccer and professional darts. Even when sports resumed in full force, weekday commuter traffic into the District stayed low, a stumbling block for an app that legally requires users to be inside the city’s boundaries when they place their bets.
The company that makes the app blames decisions the city has made for the low revenue, not the quality of its website.
Byron Boothe, the CEO of Intralot, said in an interview that the District’s Office of Lottery and Gaming makes most choices about the app, from its name and color scheme to how much money it pays out to winners, and simply hires Intralot to provide the technology that makes it work.
He said he has told D.C. officials that GambetDC would be successful if the city would raise the rate it pays out to winners to more aggressively compete with private companies BetMGM (which recently began operating in the vicinity of Nationals Park) and William Hill (which is running a sportsbook at Capital One Arena that has proved significantly more popular than the city app).
“Books really are determined by their payout. ... If the city decides it wants to stay in this space, either raise the payout to be competitive” or restrict other options for legal gambling in the city, he said. “That’s the choice the city has to make. The payout drives the player. ... D.C. sets the payout, and winning is everything. If you can win more, you’re going to like it.”
If GambetDC’s payout increases, even if it still pays less than MGM and William Hill on some games, he said, “You’ll see its revenues rise — I think the revenue is going to increase and be okay.”
Nicole Jordan, a spokeswoman for the Office of Lottery and Gaming, said that the office is indeed considering raising the payout rate. But she also pointed to other reasons GambetDC has not been able to yield large profits.
The city’s contract with Intralot says the company will get 42.5 percent of what’s known in the industry as “gross gaming revenue” — the money left over after the sportsbook takes in wagers and then pays out money to winners. From October through June, Lindsey said, GambetDC’s gross gaming revenue, far below what was once predicted, was $4.5 million, meaning the District paid Intralot nearly $2 million and should have had more than $2.5 million left over.
So why was the District’s annual revenue to that point just $230,000?
Some of the money went to marketing and other expenses. But Jordan said the most substantial expense was shoring up the other side of sports gambling in the city — the side run by private operators.
Companies running sportsbooks near stadiums like Nationals Park pay licensing fees to the city of $500,000 for five years. But Jordan said the fees, which are set in D.C. law, have proved to be too low to cover the expense of performing background checks and regularly inspecting the sportsbooks: From January 2020 through June 2021, the office took in just over $2 million in licensing fees but spent more than $3.6 million regulating the industry, Jordan said.
The cost overruns come out of GambetDC’s revenue.
Overall, Jordan said, it’s a system that could work — after all, those private operators are paying a 10 percent tax to the District, so the city is making money. Additional private companies are applying to run more sportsbooks in the District, and GambetDC just started operating kiosks at several bars so that bettors can play in person, with some of the money going to the host businesses.
“It is a model that we have very much confidence will provide the goals of what we approached,” Jordan said. “We’re looking at the dollars. We’re looking at the cents.”
The city auditor is looking as well, with a report in the works that will compare D.C.'s success or lack thereof to other cities that have legalized sports gambling. It will be the second audit of GambetDC this summer. The first, released in July, criticized Intralot for spending much less so far on hiring local subcontractors than it will eventually be required to spend by the end of its contract. Intralot and one of its subcontractors have objected to the audit’s results, with a lawyer representing the subcontractor demanding the audit be retracted, in part because it was requested by a council member for whom the auditor had once served as campaign chair.
In an interview, Boothe said that by the end of the five-year contract, he still thinks his company will have paid more than half the value of the contract to local D.C. businesses. However, the sum total will be much less than predicted, since his company is earning so much less money from this contract than the District forecast it would pay.
“The five-year potential business was $215 million,” he said. “It’s very clear that that business is not that size.”