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Sports betting is coming to Washington DC, it’s just a matter of when. But when the time comes, small businesses will be ready for a slice of the pie.
Up until now, laws around the country have benefited major casino and sports betting operators with deep pockets and political clout.
Small operators looking to break into the sports betting market have been largely ignored. They lack the name recognition of the FanDuels, DraftKings, and MGMs of the world.
But DC sports betting could be in for a minor shakeup. Although rules and regulations to govern sports betting were released on June 14, a dark cloud of suspicion has begun to surround the legislative process used to bring sports betting to the district.
But despite the legal trouble, certain lawmakers may find themselves in, the Office of Lottery and Gaming can begin accepting applications for the two types of licenses permitted in the district.
The most talked about
Eyes have been focused on DC council member Jack Evans, the architect behind the bill, who has been under fire for a number of possible issues.
According to reports, with Evans stepping aside, his colleagues can “exercise true oversight on the sole-source sports betting contract he maneuvered through the DC government.”
Gaming stakeholders have also been focused on Ted Leonis, the owner of the Washington Capitals, who in March discussed the possibility of transforming the former Green Turtle restaurant into a sportsbook.
The Green Turtle is attached to Capital One Arena, which Leonis owns, so several hurdles must first be taken care of before anything can happen.
But smaller, independent license holders will also get their shot at operating a sportsbook thanks to DC’s new law.
DC sports betting recap
For now, all sports betting in the nation’s capital will take place via kiosks, retail locations, or mobile/online.
Greek-owned company Intralot will serve as the provider for the lottery and will operate the District’s own sports betting platform and all mobile/online operations. (That is, of course, if the DC Council approves the contract; a vote on that could happen as soon as July 9.)
Class-A licensees will be the major sports arenas around the district.
- Capital One Arena
- Audi Field
- Nationals Park
- St. Elizabeths East Entertainment and Sports Arena
Each site will have a two-block exclusivity zone, inside of which no competition is allowed. Licenses will cost $250,000 each and are valid for five years.
Class-B licenses will include any other business looking to break into the gaming space. Each license will cost $50,000; however, they will lack the luxury of a two-block buffer zone.
Diving into the DC sports betting underdogs
Shane August, a former collegiate athlete at Norfolk State University and CEO of August Holding Corp., is a small business entrepreneur looking to obtain a Class-B sports betting license.
“We want our location to be the (sports)book of the people,” August told PlayUSA in an interview. “We want it to serve all types of people, corporate, sports fans, millennials, everyone!”
August is finalizing a lease agreement in the popular Dupont Circle neighborhood for his sportsbook, Handle19. He said he expects the paperwork to be completed in early July and hopes to be up and running before the start of the NFL season.
“Best case is the start of the NFL season but some of that is out of our control,” August said.
August said Handle19 would feature food and beverages, TVs and relaxed seating. He is also in early talks with two major sports betting operators to provide management services.
Language in the bill is somewhat vague, but each location is permitted to offer on-site betting using either in-house or third-party platforms.
“People across the country have their eyes on DC, some want DC to fail,” August said. “A lot of people think the New Jersey model is the only way to be successful, but I think there are many different ways.”
Jeff Ifrah, founding partner of Ifrah Law in Washington, D.C., said, while he doesn’t think people want DC to fail, sports betting in the district needs to be looked at differently.
“DC has always been about propping up small, minority and women-owned businesses,” Ifrah said. “Class-B licenses are a unique way to do that. If we already had 25 states online and then DC came on board, I don’t think we would be getting as much attention from the top (operators).”
Ifrah added that DC’s population base must be taken into account, in that it is significantly smaller than other states that have joined the sports betting landscape.
“I think if there was a state that operators were looking to fail, it would be Pennsylvania, which isn’t happening,” he said.
Is New Jersey the perfect sportsbook model?
To-date, no other sports betting bill in the country allows for small business to enter the market.
That includes New Jersey, which to industry experts is viewed as the crown jewel of sports betting models.
The Garden State model is viewed as good because it found a way to strike a balance between retail and mobile operations. For the month of May, 82.6 percent of the total dollars wagered on sports was wagered online. But don’t forget about brick-and-mortar casinos which saw revenues rise 7.5 percent to $2.86 billion in 2018.
New Jersey managed to introduce a modest tax rate and licensing structure that didn’t weigh too heavy on NJ casino operators, all of which are key to its continued success.
To be fair, DC is a particular case in that there are no casinos. Traditional casinos like casinos in Pennsylvania, Nevada and New Jersey, tend to convert an already existing space into a sportsbook.
Much of the backlash in DC came after the District Council voted to skip a competitive bidding process for the single contract to operate sports betting. Instead, the council awarded Intralot with the opportunity to run all online/mobile sports betting operations by way of the lottery.
Online heavy operators like FanDuel Sportsbook and DraftKings Sportsbook were not so pleased. However, should they partner with other license holders, they can provide retail sports betting.
Monitoring sportsbook success
“In year one, if we can be trending, or slightly below a Class-A sportsbook, that’s a success,” August said.
Considering all the negative arguments flowing from gaming stakeholders and the fact that rules and regulations were released only two weeks ago, it’s still too early to speculate when any sportsbooks will be up and running.
Despite multiple calls and emails, lottery officials could not be reached for comment.
Casey Clark, vice president of strategic communications for the American Gaming Association (AGA), said before being awarded a license, US operators across the country are subject to a stringent regulatory review process.
“Anyone interested in offering legal wagering should abide by the same, high standards set by our nation’s 4,000 dedicated regulators,” Clark told Play USA in an email.
On June 26, testifying before the Committee of the Whole, AGA vice president Chris Cylke said, offered a few remarks on behalf of the national trade association.
“Our goal is to help ensure the council of the District of Columbia makes informed decisions as it continues to move ahead with making legal sports betting a reality in the District,” Cylke said.
Cylke continued by saying:
“While the AGA recognizes that there have been significant public concerns surrounding the process that has led to the selection of a vendor to offer sports wagering, it is not our role to comment directly on that process or the suitability and ability of that specific vendor to successfully provide sports betting in the district.
What we can do is offer input on the critical areas that the district and every other governmental body should consider as they decide who is authorized to offer sports wagering within their jurisdiction.”
You can read Cylke’s full comments here.
Getting into the business
Sports betting is one of the most highly regulated industries in the country. When asked why he chose to get into such a complex sector, August said he did so for two reasons.
The first was rather simple; he wouldn’t be doing his job as an entrepreneur if he didn’t seize the opportunity.
The second reflected his time on the gridiron.
“As a former athlete, sports wagering is the closest you will get to being on the court or between those white lines again,” he said. “That feeling you get knowing that if your team can march down the field and kick a field goal and you win $5,000 — that’s the closest intensity to playing the game.”
