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FanDuel Writes DC Council Chair About Sports Wagering Budget Change

Updated: Jun 10

May 31, 2024

The Honorable Phil Mendelson

Chairman Council of the District of Columbia

1350 Pennsylvania Avenue NW Washington, DC 20004

RE: Subtitle R of Title VII of Bill 25-784, the “Fiscal Year 2025 Budget Support Act of 2024”

Dear Chairman Mendelson,

On behalf of FanDuel, I want to thank you and the DC Council for your current work to determine the best approach to offering legal, regulated sports betting in the District that benefits the District, its residents, and its small businesses. As a twenty-five year resident of DC, I too am personally invested in ensuring the best outcome for our community.

As you are aware, FanDuel is the number one sportsbook operator in the U.S., with an especially strong market share in neighboring Maryland and Virginia. We also planted our flag in the District early when sports betting was first legalized, entering a partnership with DC United and opening a retail FanDuel Sportsbook at Audi Field.

In April of this year, through a subcontract under a contract administered by the Office of Lottery and Gaming (“OLG”), Modification #9 of CFOPD-19-C-041 (“OLG contract”), FanDuel launched its mobile sportsbook in the District, and in doing so immediately transformed the market. In just its first month of operation, FanDuel generated over $1.9m in revenue for the District (compared to the $4.3m generated for the District in the previous four years of operation).

Because there appears to be some lack of clarity as to how sports betting would operate

under an extension of the OLG contract, and the implications for that contract in the event the DC Council passed a new law opening the market to additional licenses, I would like to clarify any misperceptions. Under the terms of its subcontract, FanDuel is approved as

OLG’s vendor to manage OLG’s, and the District’s exclusive, citywide mobile sports wagering app, and retail operations of OLG-licensed providers. Under this agreement, FanDuel:

• Immediately absorbs all operational, marketing, and advertising costs previously charged to OLG, and assumed all financial risks;

• Provides a 40% revenue share to the District for mobile sports wagering, with zero costs charged back to the District, the net result of which is more than double the effective rate of the original GambetDC’s revenue share;

• Provides a $5 million up-front guarantee for the first fiscal year of operations (which in fact covered only the period from its launch in April through July 15, 2024, the end date of the current term of the OLG contract), and a $10 million guarantee for each subsequent fiscal year as part of the extension; and

• Replaces GambetDC’s existing in-store gaming kiosks with FanDuel’s kiosks on a phased basis and assume responsibility for the extensive costs of managing the retail operations, at a loss to FanDuel, thus saving the District millions of dollars each year it spends currently to supporting this program and providing a major boost to the local small businesses that depend on this revenue.

The Office of the Chief Financial Officer (“OCFO”) has projected that over a 5-year contract extension, FanDuel would generate $144 million for the District through its online sportsbook. Our early performance more than validates these projections, and the minimum revenue guarantees should provide the District financial assurances in making the determination to extend the OLG contract. Should the DC Council’s sole action on sports betting be to extend the OLG contract with FanDuel as the subcontractor, all of the above promised will be realized. Office of Lottery and Gaming, “Office of Lottery and Gaming Approves FanDuel as Sports Wagering Operator for District of Columbia.” March 9, 2024, available at gaming-approves-fanduel-sports-wagering-operator-district. This FanDuel projected net transfer (gov’t EBITDA) meets or exceeds the OCFO’s original Fiscal Impact Statement from 2019.

The DC Council is also currently considering enacting Subtitle R of Title VII of Bill 25 784, the

“Fiscal Year 2025 Budget Support Act of 2024 (“Subtitle R”),” which is based upon B25-0753, the “Sports Wagering Amendment Act of 2024” (the “Sports Wagering Bill”). The Sports Wagering Bill contemplates providing citywide mobile sports wagering licenses to Class A operators, taxed at 20%, and a new class of operators, Class C, taxed at 30%. As noted above, FanDuel has a pre-existing relationship with DC United and Audi Field, under which it holds a Class A license for retail and the rights to Audi Field’s Class A license for mobile sportsbook.

Accordingly, should Subtitle R be enacted, FanDuel will transition its operations in the District under its Class A license under the new regime consistent with its pre-existing contractual relationship, and invoke its termination right under the subcontract. As a result, FanDuel (i) will no longer pay 40% of GGR to OLG, (ii) will instead pay a license 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. In total, the sports wagering contemplated under Subtitle R would allow multiple operators to offer citywide mobile sports wagering at either half or three-quarters of the revenue share currently provided by FanDuel under the OLG contract without (i) minimum revenue guarantees or (ii) an obligation to furnish and service retailers with kiosk machines.

According to the testimony of OLG Director Frank Suarez during the hearing on Sports Wagering Bill’s hearing, the Office of Revenue Analysis estimated that the District would see a decline of $15.32 million in revenue from sports wagering based on forecasts of the same four year period if the District adopted the Sports Wagering Bill in comparison to the lottery contract DC Office of Lottery and Gaming / Sports Wagering Approved Licenses, available at extension. However, based on the initial numbers release by OLG, this is a conservative estimate. In the first 30 days of operations, FanDuel generated $1.9 million to the District, which substantiates initial projections that current District-operated sports wagering will generate nearly $23 million in the first year. By contrast, according to the Report on Bill 25-784, the “Fiscal Year 2025 Budget Support Act of 2024”, Subtitle R would generate $8.4 million in Fiscal Year 2025 and $32.2 million over the subsequent four years. Therefore, while FanDuel will be operating in the District under either regime, the Sports Wagering Bill or Subtitle R would lead the District to a significant decline of revenue from sports wagering in comparison to the OLG contract extension.

FanDuel appreciates the difficult budget decisions the DC Council and lawmakers around the country must make given the current economic climate. FanDuel does not take a position on how the District or other jurisdictions dedicate revenue from sports wagering. Nonetheless, conservative estimates previously mentioned highlight that the District would generate significantly more revenue under the contract extension than Subtitle R. FanDuel remains committed to working with the District under the conditions of the contract extension should the DC Council consider re-evaluating both proposals and the timing of

the commencement and/or expiration of each one.

If you have any questions or require additional information, please do not hesitate to contact me. Thank you.

Christian Genetski

President FanDuel

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