Giving DC Sports Millionaires Another Winning Hand

May 24, 2019

When Ward 2 DC Council member Jack Evans persuaded his colleagues to approve the Sports Wagering Lottery Amendment Act of 2018, tucked nicely inside the legislation were sections that privileged millionaire sports owners and their facilities-- Audi Field, Nationals Park, Capital One Arena and St. Elizabeths East Entertainment and Sports Arena. Chief among the advantages was the creation of an exclusive operating zone within a two-block radius of each of those establishments.


That prevented small businesses in the zone from applying or securing a Class B License from the DC Office of Lottery and Gaming (OLG) to operate a betting parlor. The OLG, which is under the supervision of the Office of the Chief Financial Officer (CFO), would be the prime operator of sports wagering in the city.  By creating the exclusive zones, the council became participants in a scheme that essentially would drive money to a few select businesses, while denying dozens of others the right and opportunity to participate in the new sports wagering industry.


Evans appears to have struck again. Last week, as part of its initial vote on the city’s $15.5 billion fiscal year 2020 budget and financial plan, the council approved this Evans-backed amendment to the sports wagering law: “A Class A operator may apply to operate sports wagering conducted over the internet, through mobile applications, or through other digital forms, but not through a physical location, outside of the physical confines of its approved sports wagering facility, within 2 blocks of its designated facility; provided, that the sports wagering conducted by a Class A operator over the internet, through mobile applications, or through other digital forms may not function within the physical confines of a different Class A operator’s designated facility.”


On the surface, that change may seem innocuous. However, the amendment would permit the sports owners—the only ones authorized to hold Class A Licenses—to operate outside of their brick and mortar facilities as long as they remain within the prescribed two-block exclusive zones. That alone could result in the weakening of the city’s monopoly on sports-wagering apps and a reduction in its overall direct profits. Most egregious, small businesses who were disadvantaged by the creation of the exclusionary zones could be cast as open prey for sports millionaires.


Understandably, small business owners are livid. “The billionaire private operators now get to run the sports betting apps and generate revenue in small businesses that they don’t own,” said one person, who like others, fearing retaliation, requested anonymity. “This would allow someone to come into your business and set sports wagering, but you, the owner of the business can’t even get a Class B license.”


Consider that a restaurant like Clyde’s, which is located next to Capital One Arena, is prohibited from establishing a Class B betting parlor or generating wagering revenues because of the exclusive zone clause in the law. However, Evans’ amendment would now allow a Clyde’s customer to use the Capital One/Monumental Sports app to make a bet from inside the restaurant. Clyde’s would get no money from that exchange, according to the group of knowledgeable small business owners who are demanding that the council repeal the exclusive zone or repeal the recently approved amendment.


“The zone is not fair; using businesses like they are planning [to do] also is not fair,” said another small business-person: “It’s like the mob mentality. It’s certainly not free enterprise.”


Just to be clear: TBR is not against sport wagering. The problem is that elected officials have deliberately advantaged one group of business owners over another. The favored group has come to the public trough multiple times before. For example, Ted Leonsis, head of Monumental Sports and owner of the Washington Wizards and Washington Capitals, has become expert at sucking up the public’s money; he got $50 million from the city to make upgrades at privately owned Capital One Arena. He secured more than $60 million for a practice facility in Ward 8 near Congress Heights Metro Station; despite the obvious benefit to his teams, Leonsis parted with only $5 million of his money.


“The man’s a vampire,” said one high-level DC government official.


Ted Lerner, the patriarch of the family that owns the Washington Nationals, may not be any better. He likely has forgotten that Nationals Parks actually belongs to the city; District taxpayers and local businesses ponied up $600 million to construct that facility.


   WHEN TBR called Evans to discuss small business owners’ concerns, he seemed baffled. “I’m struggling because I’m not seeing the issue,” he said.


Funny, TBR saw the problem immediately: Big sports millionaires who didn’t want the small businesses around their facilities to benefit from sports wagering get to pimp those businesses and their customers--without being required to provide a commission or a tip. That transaction, fraught with injustice and inequity, is being enabled by elected officials.


Evans called the amendment a correction. “There was a mistake in the drafting” of the original law. The drafting was done by Evans’ own staff, however. He said the bill created so-called “dead zones,” in the exclusive two-block radius where “nobody’s app could work.”


Council Chairman Phil Mendelson said almost the same thing: The language is a bit dense and may even be worded in such a way that we need to tweak it. The purpose, however, is to avoid the unintended consequence of the legislation already adopted, that has the effect of creating dead zones around certain license holders such as the downtown arena and nationals ballpark.”


A spokesperson for the CFO said the amendment “would open what would otherwise be dead zones, where no revenue would be generated.


“We have no position on the amendment as it does not have a negative impact on the fiscal impact statement for the sports wagering bill,” added spokesperson David Umansky.


The CFO may be trying to avoid any tension between the council and his office. After all, he must come before the legislature later this summer to get approval for the sports wagering contract it has been negotiating with Intralot; the Greek company is developing the system that will be used by the lottery.


Still, if you’re confused it’s understandable.


Sports owners who lobbied for the creation of the exclusive zones, now have claimed that those areas around their facilities are suddenly “dead zones.”


Don’t believe the hype. And don’t buy that bit about a mistake in drafting either.


What likely has occurred is that the sports owners miscalculated their potential profits. With assistance from the council and CFO, they apparently are trying to minimize the damage while hedging their bets that down the road they can also eat into the lottery’s monopoly on the citywide mobile app; the sports owners lobbied against the lottery office having control of that part of the sports wagering system. 


“This is an attempt to put the camel’s nose in the tent,” said one source in the John A. Wilson Building familiar with the latest maneuvers by sports owners and their council supporters, particularly Evans. “They have done their research and not enough people will be coming to their [restaurants and bars].”


One thing is certain: The amendment expands the potential market and profit margin for team owners. Without Evans’ amendment they would have been limited to operating within the confines of their facilities. While it is Internet-based gambling, they also would have been restricted to using their privately created apps inside their brick and mortar establishments. With a game being played inside, they could rake in the money from fans who are there either in seats or in restaurants.


However, their profits could have declined when were not at home. Leonsis has offered grand ideas, demonstrating his intent to capture the wallets of fans, residents or tourists. Still, everything was contingent on getting fans inside the arenas and stadiums.  Since the betting would be over the Internet with a special app, betting could happen anywhere in the city beyond the exclusive zones using the lottery’s app—not those of the team owners.


Undoubtedly, sports owners recognized the problem. They considered their options. Hence the creation of the “dead zone” issue


If they and others, including council members, were truly concerned about dead zones and the absence of sports betting options for residents, they would remove the two-block exclusive zones around the arena and stadiums, permitting small business owners regardless of their locations to apply and secure  Class B License while allowing the market to be determined by bettors--not some political allegiance to millionaire sports owners.


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