Small businesses in the Nation’s Capital want a piece of the sports betting pie.
But if the DC lawmakers decide to open up a competitive bidding process for the lottery’s lone contract, they might lose their shot at joining the ranks of major operators.
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At least half of the 17 witnesses called before the Committee of Finance & Revenue on Monday, voiced their support for bypassing the bidding process for the DC Lottery contract, which includes sports betting operations.
So far, no sports betting bill passed following the US Supreme Court decision in May has allowed small businesses to enter the sports betting market. Bill 23-25 authored by Councilmember Jack Evans’ would be the first to do so.
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However, the process has been under much scrutiny by industry stakeholders. Following the hearing, members said they can readdress the bill as soon as Wednesday.
Flashback to Christmas
DC Council approved Evans’ bill in December. The bill is currently in a 60-day review period in Congress after being signed by Mayor Muriel Bowser on Jan. 23.
The main argument currently dividing the council is should the district bypass open bidding for sports betting instead of awarding the lone contract to Intralot?
“If you shoot an arrow through the heart of the procurement process you damage the integrity of the process,” DC resident John Ray said Monday.
Inclusion of small business
Shane August, president of August Holding Corporation, noted the inclusion of certified business enterprises (CBE) were a major component of bill 23-25.
Here is what August had to say:
“Thus far, of all the states that have legalized sports wagering the district of Columbia is the only jurisdiction that was intentional about ensuring small, local, women and minority-owned businesses had a meaningful opportunity to participate in the legalized sports wagering industry. With a lengthy procurement process and inevitable bid protest, the purpose of the council moving expeditiously to legalize sports wagering will be defeated.”
Other witnesses agreed, saying, should the council open up the process to allow other big-name operators to come in and bid on the lottery contract, small business could lose out.
Vinoda Basnayake, representing the Heist Group, a DC-based CBE had this to say:
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“As a DC-based minority small business owner – if the CFO is unable to negotiate a contract with the current lottery vendor the ability for small business to participate in sports betting will all but be eliminated.”
“Any further delay at bringing sports wagering to the market place will halt the momentum this bill has created and in turn have a negative impact on the overall success of sports wagering in the district,” August said. “Let’s give the people what they want and get the show on the road.”
Pushback from sports betting elite
Gaming stakeholders argued competition is the key to a successful sports betting market.
A veteran in the gaming industry, John Pappas, representing iDEA Growth said, any effective form of internet gaming including sports betting, relies on multiple operators competing with each other.
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Here’s more from Pappas:
“It’s been proven time and again that sports betting markets with robust competition produce the most tax revenue for governments. Having only one legal option for consumers means that unlicensed and unregulated websites based offshore will maintain their firm grip on the DC market.”
A report from Spectrum Gaming estimated the district could see nearly $92 million from sports betting over the first four years of regulation. The city argued that implementation from another vendor could delay the launch 27 months and cost $60 million.
“To help minimize the illegal market, it should be a top priority for the City Council to demand competition, not promote a monopoly,” Pappas said.
When asked about small business inclusion in other sports betting bills across the country, the American Gaming Association (AGA), the leading advocate for industry growth and innovation, declined to comment.
What’s next for DC sports betting
The most outspoken councilmember during the lengthy hearing was Elissa Silverman.
“A competitive bid process is not only considered a general best practice for both getting a price that is in the best interest of the taxpayer but also a process that is transparent and not subject to political pressure,” Silverman said.
Silverman was weary of the Spectrum report saying, “What our city’s CFO is advocating for is this legislation is quite extraordinary.”
“He, along with the head of our lottery, are arguing that we should waive our normal process of contracting and procurement and saying that it’s actually in the best interest of the District taxpayer to waive that process,” she said.
District CFO Jeff DeWitt called the legislative action a “business decision.”
“We’re just recommending what’s best financially. It’s your decision if you want to bid it out. But you can probably see that it’s going to be a pretty contentious procurement process,” he said.