Christmas for Millionaires at the DC Council

December 16, 2018


The whole holiday-season-giving-thing seems to have gotten out of hand over at the DC Council. That’s the only logical conclusion TBR could reach for why some legislators are poised this week to give final approval to the Sports Wagering Lottery Amendment Act of 2018.


On the surface, the bill seems fairly innocuous: It would allow individuals to place “single-game bets, teaser bets, parlays, over-under, moneyline, pools, exchange wagering, in-gamer wagering, in-play bets, proposition bets and straight bets on sporting events.” Those bets can occur in person “at a sports wagering facility or over the Internet…All bets must be initiated and received within the geographic boundaries” of DC, however. Sports wagering would be offered through multiple platforms, including the Internet, mobile apps, and in-person “brick and mortar” facilities. The District would own the app.


The wagering legislation, as written, would rename the Office of the DC Lottery and Charitable Games to the Office of Lottery and Gaming, which would write the rules and regulations for implementation of the law and serve as the enforcer. The DC Lottery also would be an operator of sports wagering, using, where appropriate, its current network of lottery retailers.


Chief Financial Officer Jeffrey DeWitt has calculated that law could increase revenues for fiscal year 2019 by $7.69 million and nearly $92 million over the four-year period of the financial plan; that fiscal analysis noted lottery director Beth Bresnahan is somewhat hampered by the fact that this is a new activity for the DC.  A new 10 percent tax would be levied on revenues from privately operated sports wagering businesses. Those funds would be earmarked for gambling addiction treatment provided through the DC Department of Behavioral Health, the Birth to Three for all DC Act, an educational program, and the Neighborhood Safety and Engagement Fund.

The devil is, indeed, in the details.


As currently written, the law would privilege millionaire sports owners and their facilities—Audi Field, Nationals Park, Capitol One Arena and St. Elizabeths East Entertainment and Sports Arena-- establishing a five-year monopoly, marked by geographic exclusivity that would technically guarantee them a significant portion of any betting and betting profits. One government official noted that considering the typical earnings of the teams, sports wagering “isn’t going to be a huge percentage of their profits. But they’re not in it for charity.”


The city’s profits could be reduced, however, if mobile apps other than that owned by the DC lottery are permitted to be used inside those private facilities, which the law implies. Further, sports owners would be free to create casino-like operations within their buildings, placing them one step ahead of the movement to authorize such establishments.

Don’t doubt for a second that casinos aren’t the next step in all of this.


Ward 5 Council member Kenyan McDuffie and at-large Council member Robert White have been in negotiations with Ward 2’s Jack Evans, the introducer of the legislation, around changes to the bill that could ensure businesses owned by District residents would not be left with proverbial crumbs. The better action, however, would be to table the bill, delaying the final vote until after the New Year. There is no reason to rush; having more time might strengthen the negotiating hand.


At-large council member David Grosso made that point earlier this month when he voted against approving the bill. “This rush to make D.C. the first jurisdiction in the region to legalize sports betting gives me great pause, as we do not fully understand the impact it will have on our communities,” he said in a prepared statement. “I’m concerned that not only will the revenue generated by this proposal come from the pockets of those who are most vulnerable in our city, but that it is not a reliable long-term funding source for the vital educational and public safety priorities for which the revenue has been dedicated.”


TBR doesn’t always stand with the ultra-liberal legislator. But on this one, they are side-by-side, maybe not totally for the same reason.


The gambling tug began earlier this year when the Supreme Court struck down the 1992 federal law that prohibited sports wagering; apparently, that law was grossly ineffective; the New York Times reported illegal wagers on professional and amateur sports brought in upwards to $150 billion. Justice Samuel A. Alito Jr., writing the majority opinion, offered that “A more direct affront to state sovereignty is not easy to imagine.” (TBR can think of a bunch, especially during Donald Trump’s presidency; that’s conversation is for another day, however.)


Evans, a gaming fan, seemed to have been champing at the bit; he responded quickly to the decision, which freed states to develop their own sports wagering operation. As chair of the council’s Committee on Finance and Revenue, which oversees the lottery office and the chief finance officer.  He immediately introduced legislation that would set aside all the Class A licenses for ownership and operation only at sports facilities, including Capital Arena, owned by Monumental Sports, which was founded by Evans’ good friend Ted Leonsis. That initial bill also required the city to pay the team owners a so-called royalty fee of 0.25 of gross sports wagering revenue. And, it cordoned off five blocks around their various facilities as an exclusivity zone.


Evans is nothing if not generous with his friends—never mind the source of funds may be public money. Thankfully, members of his committee reined him in; they deep-sixed the royalty fee and the exclusivity zone was reduced to two blocks.


But, even that reduction could be harmful to other businesses. Consider that a restaurant like Rosa Mexicano, which is located across the street from Capital One arena, would be prohibited from establishing a Class B betting parlor. The same would be true of Clyde’s, which is adjacent to the arena. Bresnahan told me that there may be two or three current lottery retailers who would be adversely affected, if they decide to apply for a Class B license.


Why do the sports owners need exclusivity? Aren’t they the big guys? Don’t they operate known facilities? Don’t they have huge advertising budgets that could be used to promote their wagering parlors, easily drawing bettors to their buildings?


By setting up the exclusive zone, the council may be helping the team owners build secondary businesses that would operate even when there are no income-generating home games or concerts. The local teams need not be present, after all, for Internet betting to occur.


Rather than herd bettors on behalf of the millionaire-sports-owners-club, the council should let market forces dictate where consumers actually choose to place their wagers.


Equally troubling about the existing law is the fact that it would create only four Class A licenses—all of them would be set aside for sports owners and their facilities.


Initially Evans had proposed five; one would have been at RFK Stadium, but Ward 6 Council member Charles Allen was able to get it removed from the bill. Undoubtedly, Evans was thinking how to sweeten the pot to seduce Dan Snyder to bring his sorry football team back to DC.


Seriously?! Other than Evans, Mayor Muriel Bowser, and a few Republican congressmen, does anyone really want them back in the city?


The Class A license would be a steal at $250,000 for five-years; it would be renewable for the same amount and for the time length of time.  Initially, Evans had set that at $50,000, according to Bresnahan.


Evans said that he followed the advice of the lottery. Bresnahan said she persuaded Evans to increase the cost, noting that the lottery needed additional funds to help create a new division that would manage the sports wagering operation.

In Pennsylvania, a Class A license goes for $1 million. It’s not like the sports owners couldn’t afford to pay the additional costs.


All of this raises questions about motivations: Is Evans giving away the store? Are some council members willing to help him play Santa Claus?


Evans said he is not looking for a job in the gaming industry. “I’m never leaving the council.” 




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