There’s simply too much money and too many politically connected contractors tied up in D.C.’s tortured sports betting regime for it to go down without a fight. And Loose Lips hears there’s one heck of a battle brewing in the Wilson Building over sports wagering.
Council Chair Phil Mendelson and At-Large Councilmember Kenyan McDuffie have been facing some intense resistance to their plan to open up the city’s sports betting market to private operators ever since they unveiled it two weeks ago as part of the 2025 budget. Some of that pushback has come from a predictable source: the very companies benefiting from the District’s existing monopolistic system. But the plan has also attracted criticism from several councilmembers, some of whom share the concerns advanced by the influential contractors working with the Greek firm Intralot on the current sports betting program.
Ward 5 Councilmember Zachary Parker has taken the lead on pitching an alternative, arguing that the Council should press pause on opening up the market until it can more thoroughly evaluate the idea. He says he’s not opposed to the plan, in theory, but he objects to how it’s been moved through the budget process with minimal discussion—and how it would dedicate the entirety of the new revenue generated to the city’s “baby bonds” program, a pet project for McDuffie aimed at reversing the racial wealth gap. Parker hopes instead to find some funding for baby bonds but otherwise strike the changes to sports betting from the budget. He plans to back an amendment to that effect at the Council’s second vote on the spending plan Wednesday.
“Given our history with sports wagering in the District, we need a public record here,” Parker tells LL. “This should not be done in the cloak of darkness with private meetings and lobbyists running around the Wilson Building trying to get this deal done.”
He might find some takers after At-Large Councilmembers Anita Bonds and Christina Henderson and Ward 1 Councilmember Brianne Nadeau raised concerns about the Mendelson-McDuffie plan during the first round of budget deliberations on May 29. And Parker claims he has the votes to pull this off. Mendo, however, told reporters Monday that he does not support removing or altering his betting plan and would oppose any effort to do so. (McDuffie’s spokesperson did not respond to a request for comment.)
“The chairman has made clear to me that he anticipates there being a fight on this,” Parker says. “And I’m ready to fight because I feel like I’m on the right side here, on the side of small businesses in Ward 5 and across the District, on the side of process and good government, and on the side of District residents.”
Much of Parker’s hesitance about moving forward with McDuffie’s plan stems from his belief that FanDuel, the gambling giant that has recently stepped in to try and save the city’s sinking system, will ultimately generate more tax revenue for the District if it has more time to prove its worth. This a prime argument advanced by the city’s current sports betting operators, of course, who claim that any change to the system would simultaneously cost the District millions in tax revenue while hurting bars and restaurants that have relied on betting kiosks to bring in customers. With powerful moneyed interests on both sides of this particular debate, it’s difficult for LL to see any purely disinterested actors here.
A particularly brash website popped up last week taking aim at McDuffie, specifically, on these points, dubbing his plan a “bill for billionaires” that “worsens the D.C. budget crisis” by costing it $100 million in “guaranteed city revenue for essential services,” all while “helping only billionaire pro sports team and casino owners.” Buried at the bottom is a disclosure that the site was funded by the “Regional Alliance for Small Business Executives,” a political fundraising committee chaired by Emmanuel Bailey, one of the most controversial figures in the city’s sports betting saga. Bailey is a longtime political operator and the top executive at Veterans Services Corporation, a subcontractor on the sports betting deal that has battled persistent allegations that it isn’t doing the work it’s promised. Bailey didn’t respond to a request for comment.
LL also hears that the Council has been flooded with form letters from small businesses with betting kiosks arguing against this change. Some haven’t even removed emailed instructions from Bailey or other lobbyists before sending them.
FanDuel has opted for a more restrained approach that nonetheless relies upon many of the same arguments. Christian Genetski, the company’s D.C.-based president, penned a June 5 letter to Mendelson arguing that the city would lose out on something like $15.3 million in revenue if it opens up the betting market to other companies. Genetski says FanDuel would abandon its arrangement with Intralot, since it would pay a lower tax rate on its earnings if it joins the rest of the market and no longer acts as the city’s official sports betting partner. If the city’s lottery extends its contract with Intralot (currently set to expire in July), Genetski says the District could avoid these negative consequences.
“FanDuel appreciates the difficult budget decisions the DC Council and lawmakers around the country must make given the current economic climate,” Genetski writes, according to a copy of the letter forwarded to LL. “Nonetheless, conservative estimates previously mentioned highlight that the District would generate significantly more revenue under the contract extension than [Mendelson and McDuffie’s plan].”
Left unsaid, of course, is that FanDuel has a tremendous amount to gain from remaining the only sportsbook operating citywide. It may pay a higher tax rate under this present arrangement, but it also gets to box out its competitors (such as DraftKings, Caesars, and BetMGM), which can only accept wagers in select areas of the city via partnerships with pro sports teams. FanDuel, meanwhile, can accept the additional taxes if it means it earns more revenue overall without dealing with any of that pesky competition.
“FanDuel remains committed to providing D.C. residents with a best-in-class sports betting offering under its current contract with the Office of Lottery and Gaming, while also maximizing revenue to the District under that agreement,” a company spokesperson wrote in a statement, conveniently failing to mention its threat to abandon said contract.
It’s hard to suss out who to believe here because each side is convinced the other is inflating the benefits and downplaying the risks of their preferred approach. Mendelson and McDuffie, for instance, believe that Chief Financial Officer Glen Lee is severely underestimating how much money the city stands to make if it opens up the market. Lee believes D.C. can expect to pull in about $28.6 million over the next four years under Mendo and McDuffie’s proposal, as opposed to the $42.1 million it could reap by preserving the deal with FanDuel as it is. Genetski was even more ambitious in his letter, calling the CFO’s estimate “conservative,” and projecting that the company will bring in $23 million in revenue in its first year alone.
“This is my third or fourth time around with the issue of the sports betting arrangement, and what I have seen each time is that parties on each side emphasize, I’d even say overemphasize, how their position is far more profitable to the District and that the other side of the argument is far less profitable,” Mendelson said Monday. “And that’s exactly what we’re repeating here.”
LL will note that Mendelson was not nearly as skeptical of ex-CFO Jeffrey DeWitt’s rosy revenue estimates when he helped rush through this troublesome contract in the first place, but perhaps he’s been burned enough to change his ways. At least there is a little more data here to support FanDuel’s position, as Parker notes—the company reported bringing in $1.9 million in the first month of its contract with Intralot, all without major betting events like the NFL season or March Madness to drive interest. That’s nearly a quarter of the $8 million Lee expects the McDuffie-Mendelson plan will generate annually. Plus, FanDuel has pledged to provide the city at least $10 million a year for the next four years, regardless of its performance.
“I think why the CFO is likely to score these proposals a lot lower is because the District has already been burned,” Parker says. “We were promised years ago: Sports betting, it’s going to bring in all this revenue, and we didn’t see it materialize. And so I think the CFO is erring on the right side here.”
But the argument advanced by McDuffie’s camp is that the CFO is failing to take into account the benefits associated with opening up the market, since this change could lure in more bettors loyal to sportsbooks besides FanDuel. If the District continues catering solely to FanDuel, the other companies doing business with the city’s pro sports teams could simply pack up and leave and further damage the city’s revenue picture, an argument made directly by the teams during a hearing on McDuffie’s stand-alone legislation on this plan.
“But it could be worse: Without a pathway to expanded revenue through citywide mobile betting, the operators may not make it through the initial term since FanDuel—the market leader in many jurisdictions—will capture our operators’ market share and increase their revenue losses,” top executives with Monumental Sports and Entertainment (the owner of the Wizards and Capitals), the Nationals, and D.C. United wrote in joint testimony. “This creates a compounding negative effect on the teams and accelerates the likely departure of the teams’ gaming operators.”
Lee acknowledges that it’s hard for him to estimate revenues when there are so many hypotheticals flying around, calling the environment “highly uncertain.” “Data from other states show a high variance in the gross gaming revenue, the amount that is taxed, due to the varying strategies employed by operators to attract customers (including free bets and other promotions),” says a spokesperson via email. LL takes his point, but will also note that Lee has a habit of delivering revenue estimates friendly to his policy priorities—the CFO oversees the Office of Lottery and Gaming, which manages sports betting in the city.
Parker believes that this uncertainty about revenue is all the more reason for Mendelson and McDuffie’s proposal to receive “more scrutiny.” He would much rather see McDuffie advance it out of his economic development committee for a stand-alone vote by the full Council, instead of trying to rush it through the budget.
“Why is the proposal we have before us not asking more of the other big guys?” Parker says. “When you think of these sports betting companies and apps that want to get into our market, why aren’t there guarantees for the District? Why aren’t there spoken-for supports for small businesses? That is a choice. … It needs to be vetted, there should be a transparent record. And members should be on the record for how they vote on the matter.”
LL finds that approach noble enough, as there are complaints every year about one policy or another getting shoehorned into the budget without a stand-alone vote. The problem in this case is that the city’s contract with Intralot will expire in just a few weeks, and the lottery has still not sent the Council a request for an extension. McDuffie engineered this plan as part of a bid to force the lottery to ask for only a brief extension of this deal to allow for a more fulsome evaluation of FanDuel’s work (perhaps for one or two years) rather than the five years they’re legally allowed to pursue. There’s no telling what the lottery might do if the Council casts aside some of its leverage over the agency. (A lottery spokesperson declined to comment on this dispute.)
Even still, Henderson raised many of these same process concerns at the Council’s May 29 meeting. Nadeau was even more critical, arguing that the small amount of money Mendelson proposed to fund efforts to fight gambling addiction would be insufficient if a flood of new bettors pick up wagering due to these changes.
“I think we’re hurting more people than any of that revenue will ever help,” Nadeau said during the meeting. “I don’t know that this is something the District will look back on and be proud of.”
This is why Parker feels optimistic that his approach can succeed. He plans to offer McDuffie and other baby bond proponents an olive branch by drawing $1.8 million from a yet-unspecified source, hoping to convince his colleagues that a vote to nix the sports betting plan is not also a vote to endanger the oft-threatened program.
“This is not an attack on baby bonds,” Parker says. “It is worth noting that the certified revenue from the FanDuel contract is more than enough to replace any money that we would have to cut, and we could direct future revenues to the reserves, which I think is a better place for it. Now, if you want to fund baby bonds up to a certain dollar amount: so be it. I think it is inappropriate at a time where our CFO is saying we are having liquidity concerns, where we’re seeing our downtown quarter retract, that we are saying we’re going to make a bet on an unproven model and then on top of that direct all future revenue to this one policy.”
The only reason that baby bonds are involved at all is because of McDuffie, who has taken on the job of trying to untangle this sports betting mess, so it is fair to question why that program should receive all the betting revenue when the city has so many other pressing needs. (Not to mention that the original vision of the sports wagering push was that this revenue would fund early education and gun violence programs, and that basically never happened.)
But, at the end of the day, LL finds it hard to see much virtue in either side of the argument. Either the city locks in a monopoly for FanDuel, and helps questionable contractors such as Bailey keep raking in cash, or it grants the wish of huge casinos and sportsbooks, which are already making so much money that they have inundated virtually every form of media with advertising urging bettors to fritter their savings away. Maybe the city makes some extra money in the process, but after years of broken promises, who can really be sure?
“I think the conversations that are most meaningful are the conversations with those who look specifically at what the legislative language is and how they interpret it, rather than looking at the lobbyists,” Mendelson offered Monday. LL wishes everyone in the Wilson Building luck sorting through the spin.