At-Large Councilmember Elissa Silverman
At-Large Councilmember Elissa Silverman Credit: Darrow Montgomery/file

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At-Large Councilmember Elissa Silverman is many things, but “vocal champion of the free market” isn’t one of them. Yet, on the issue of sports betting, she’s sounding an awful lot like Milton Friedman these days.

Silverman wants to bust open D.C.’s sports wagering market and has pitched legislation this week that would end the government’s monopoly on citywide mobile betting, a change that would allow the industry’s major players to aggressively move into D.C. just as they’ve done in neighboring Virginia. Some around the Wilson Building are skeptical of Silverman’s motives here, considering her ongoing re-election fight and the tight, two-month timeline she has to negotiate to get this bill passed. But the politics of the issue aren’t as cut and dry as a typical election season stunt.

On the one hand, there are some obvious upsides to this move for Silverman. She has railed for years against the city’s contract with Intralot, the Greek firm with some powerful local friends that won a sketchy, sole-source deal to run D.C.’s Gambet platform. Her proposal would force the city to re-bid that work when the contract expires in 2024 in addition to opening the market to private competition. Loose Lips imagines that slamming Intralot makes for good politics, considering its track record of high-profile failures running the gambling app and revenue figures that have consistently fallen short of the lofty promises advanced by its backers when the deal was debated four years ago.

Plus, Silverman gets to take some not-so-subtle shots at one of her main rivals in the at-large race, Ward 5 Councilmember Kenyan McDuffie, since his support was critical in helping the Intralot deal pass and he’s had oversight of the sports betting program in his role as chair of the economic development committee. McDuffie has made some supportive noises in the past about opening up the market in the face of Gambet’s failures, but Silverman would be the first to take legislative action.

The flip side is that making such a move involves dealing with the sort of business-friendly insiders that Silverman has built her career on criticizing. Her goal is to bring in more money for the city with this change, since D.C. would get a cut of the sportsbooks’ gross revenue, but this would also be an undeniable windfall for some massive, out-of-state corporations: not exactly Silverman’s usual favorites.

Think of all the firms that inundate your TV with ads on any given football Sunday: Caesar’s, DraftKings, FanDuel, MGM. All of them are surely salivating at the chance to expand into D.C. Some already have a toehold in the District by operating books at sports arenas, but that’s nothing compared to mobile betting citywide.

Flip through the city’s lobbying records, and you can see evidence that they’re gearing up for a blitz on the issue. The Sports Betting Alliance (a trade group representing big players DraftKings, FanDuel, and MGM) filed papers Monday to report hiring Holland and Knight’s prominent local lobbyist Janene Jackson, a top aide to Ward 7 Councilmember Vince Gray back when he was mayor. Those companies and a few others (including Fanatics and Bally’s, neither of which has a major presence in Virginia) have also reported hiring the law firm Orrick, Herrington & Sutcliffe to lobby on sports betting issues over the past few months. Representatives from Orrick, Herrington & Sutcliffe met with Silverman and her staff to discuss “mobile sports betting” on Sept. 30, the records show.

In an interview with LL, Silverman admits feeling some discomfort dealing with an industry that is, essentially, an “oligopoly,” mainly dominated by a handful of big firms. But she says it is worth the trade-off if it would mean actually bringing in serious tax revenue from the program—the Office of Lottery and Gaming estimated in a July Council hearing that Gambet added $2.2 million to city coffers in the first half of 2022, roughly a tenth of the rosy projections advanced by former Chief Financial Officer Jeffrey DeWitt.

“I’m agnostic on gambling, but I’m pro creating revenue for programs I care about,” Silverman says. “Every moment that we spend debating what to do with a poorly performing program is less money in the budget.”

The irony here is that, no matter how much urgency she recommends, Silverman’s bill probably won’t go anywhere without McDuffie’s cooperation, since it was referred to his economic development committee as a first step. A spokesperson for McDuffie declined to comment on the bill, but Silverman is hopeful to get a hearing before the end of the year (when all unpassed Council legislation heads back to the drawing board). That way, she can avoid the need to hold another hearing next year, if she wins another term.

“The election will end in two weeks, and then we’re going to be back to governing and what is best for the city,” Silverman says. “So let’s have a hearing, let’s hear from the new CFO [Glen Lee] and the new lottery director, and maybe there will be refinements.”

If previous arguments from new lottery head Frank Suarez are any indication, then the agency is likely to put up a fight if Silverman can move the bill forward. A spokesperson for the lottery didn’t respond to a request for comment, but Suarez argued aggressively against opening to the private market in the July hearing convened by McDuffie’s committee. Most insiders agree that the lottery could actually decide to allow other companies into the market without any new legislation—the D.C. code gives the city the choice between its current, sole-source system and a free market. The law says that the choice depends only on “whichever can be shown to return the most revenue to the District.”

“Changing the model to a privately operated mobile and online model will be riskier and provide a lower share of sports wagering profits to the District, but also will increase regulatory costs,” Suarez told the Council in July.

Suarez noted that private sportsbooks in the city took in substantially more revenue than Gambet (roughly three times the amount, at $128.9 million for the first half of the year) but returned less than half of Gambet’s tax revenue, with $990,000 flowing to city coffers. That’s because D.C. gets a 10 percent cut of private sportsbooks’ revenue compared to half of Gambet’s gross revenue. Silverman’s bill would up that tax on private books to 15 percent (matching Virginia’s rate), but Suarez said such an approach would still require a massive increase in betting from private sportsbooks to rival how much money Gambet brings in right now.

“Why would we want to increase the risk?” Suarez said. “Why would we want to make it so that we rely even more on a riskier revenue stream?”

Of course, there are caveats to Suarez’s points. The $2.2 million he cites in Gambet revenue doesn’t account for any expenses the lottery would need to deduct to offset some of Intralot’s operating costs—a D.C. auditor report last year found that the city is unique among other states in how much money it’s obligated to hand over to the contractor annually. This is part of the reason the sports betting program actually cost the city money in its first year of operations.

And the windfall from private sportsbooks, which are already much more well-known among bettors compared to Gambet, could be large enough to make up for the difference in tax rates. The American Gaming Association estimated in a July letter to the Council that private sportsbooks could take in more than $47 million in gross revenue annually if they’re allowed into the District, returning about $7 million to the city if they’re taxed at the 15 percent rate. Those numbers should certainly be taken with a grain of salt, considering the industry-backed source, but even if D.C. pulls in half that amount it would likely beat Gambet’s current performance.

Suarez argued that Gambet’s revenues are growing more substantially than those of the private books in the city, and that trend should only continue as Gambet gets settled in.

Another feather in the lottery’s cap: Suarez said Intralot has substantially improved its compliance with requirements that it work with small, local businesses, resolving some concerns raised by a separate audit that found it wasn’t doing enough work with these “certified business enterprises.” This is an area where Intralot has a leg up on its national competitors, as it can point to extensive subcontracting work with CBEs as evidence of its benefit locally—never mind the big questions raised about the legitimacy of those CBEs, and the lottery’s own admission in its annual report on CBE participation that the “​​highly regulated nature of the sports wagering industry” makes it difficult to find small businesses to partner with companies in this space.

Those defenses aside, the July hearing made it clear which way the political winds are blowing. McDuffie and Silverman both peppered Suarez with skeptical questions, as did Ward 3 Councilmember Mary Cheh (another opponent of the original Intralot deal) and At-Large Councilmember Christina Henderson. Even Gray piled on to say Intralot’s performance made him feel like a “fool” for backing the contract in 2018, while Ward 6 Councilmember Charles Allen and Ward 2 Councilmember Brooke Pinto signed on as co-introducers for Silverman’s bill (along with Cheh). Add up all the contract’s skeptics, and it’s not hard to imagine a seven-vote majority standing behind such legislation.

There may be some horse trading left to manage if this bill advances (Silverman says she’s heard some reservations from the companies that already operate sportsbooks at the city’s stadiums that they may want some leg up over new entrants to the market), but momentum may be swinging toward her side. Still, it is thoroughly unusual to LL to see Silverman, regularly assailed as D.C.’s most anti-business lawmaker, playing mediator for these corporate interests.