FanDuel will opt for a reduced tax rate, and leave its Washington DC lottery contract if DC Council approves a free market. Christian Genetski, the company’s president, wrote to DC Council Chairman Phil Mendelson earlier in this month explaining FanDuel’s position.
In March, DC’s Office of Lottery and Gaming revealed that Intralot (the company which ran the GamBetDC Platform) planned to shut down the platform and contract with FanDuel. At the time, this news was a shock to DC Council. Bettors, however, welcomed the new rules.
GamBetDC’s launch in May 2020 was marred by usability issues and other problems. GamBetDC has underperformed in its four-year tenure as the sole mobile platform for the entire city. The District earned $4.3 million in taxes from the platform during that period.
Operators of OLG are subject to a 40% tax. Under the amended proposed law, in an open market operators will be taxed 20%. FanDuel has paid $1.9m to the city in taxes in just 30 days.
FanDuel has already gained market access
FanDuel’s letter, dated June 5, was sent one week prior to the DC Council voting on its budget for FY25. In the proposed budget, there is a clause that would open up the betting market. DC will welcome competition if the budget is passed as it stands. FanDuel has already gained market access with a DC United deal in Major League Soccer. It operates a sportsbook in United’s stadium, Audi Field.
According to the law in place, operators of sportsbooks can work with sports clubs and offer geofenced digital bets as well as betting on-site. BetMGM and Caesars Sportsbook both have physical locations in Nationals Park and Capital One Arena, and they offer mobile betting inside an exclusion area. Under the proposed law, companies partnered with professional teams/venues such as FanDuel at Audi Field would have access to digital platforms.
The state could also welcome other commercial operators through new licences “Type C”, or partnerships, at a tax of 20%.
Exclusive operators pay a higher tax rate
FanDuel pays to the city for exclusivity the tax rates that are higher. The District has already received $5m from FanDuel for its first year of operation and will receive $10m annually per contract. FanDuel is responsible for all costs related to “operations, marketing and advertising”. Intralot had previously charged OLG fees for these costs.
Intralot will continue to be the Lottery’s Sports Betting Operator, even though the current contract is set to expire next month. The company could subcontract the digital sports betting business to another operator.
FanDuel will be replacing GamBetDC Kiosks in lottery partner locations. The kiosks will allow consumers to place wagers instead of betting via their smartphones.
OLG will “nolonger have FanDuel participation”
Genetski, in a letter obtained by iGB, wrote: “Should Subtitle R become law, FanDuel would transition its District operations under its existing Class A license under the new regime, consistent with the pre-existing contract relationship and exercise its termination rights under the subcontract.” Genetski wrote in the letter, obtained by iGB, that FanDuel would no longer be paying 40% of GGR (gross gaming revenue) to OLG. Instead, it will pay a license fee, and 20% on all sportsbook wagering profits.
FanDuel will no longer be a part of any district-wide sportsbook operation by OLG.
FanDuel’s decision to cut ties with OLG seems to be a good one, if the DC Council decides to increase competition in the marketplace. It could, however, leave the lottery with no viable digital betting platform. Due to high taxes and fees, commercial operators will likely avoid doing business with lottery.
As OLG Chief Frank Suarez stated in an hearing about this subject, it’s possible that the lottery will have to launch GamBetDC again. The lottery could also be without a betting operator or have to wait until Intralot can find a replacement.
On Tuesday, 18 June the DC Council Committee of the Whole did not have the budget on its agenda. The next vote opportunity appears to be the 25th legislative session. If the budget passes, it will go into effect 15 July.
